FACTS & FIGURES — Lead enters a new era

Between 1960 and 1973, the consumption of refined lead in the West rose at an average annual rate of 4%. In the latter year, total consumption amounted to just over 4 million tonnes. The impact of the first oil-induced recession caused this figure to decline by more than half a million tonnes over the next two years, but this was followed by four consecutive years of growth, such that by 1979 (just prior to the second oil-induced recession) it stood at a new peak of 4.2 million tonnes. Since then, even allowing for the impact of recession, the 0.5% average annual growth recorded is woeful.

Although we do not expect a return to the halcyon days of the 1960s and early 1970s, we are nonetheless confident that lead has entered a new era, during which its underlying rate of growth will easily exceed that recorded during the 1980s and early 1990s. This view is based entirely on the growth prospects for lead’s major end-use market: batteries.

The extent to which lead has come to rely on demand from the battery sector is evident from figures published by the International Lead and Zinc Study Group, which show that in 1979 batteries accounted for just under half of total Western lead demand. By 1993, this proportion had risen to almost two-thirds, demand from the sector having grown by an average annual rate of 2.8%.

Despite its relatively small population, North America is the most important region, consuming 1.18 million tonnes of lead usage. This is a far higher proportion than anywhere else and is largely a reflection of the high level of vehicle ownership.

Demand from the battery sector has increased in all areas, particularly so in Asia, where it doubled between 1983 and 1993. Although Japanese demand rose steadily, it was the economies of Southeast Asia which recorded the greatest increase, reflecting the substantial buildup of their domestic automobile industries.

It is just as well for total lead demand that it has been underpinned by this one sector. Environmental pressures, combined with competition from other metals and materials, have caused lead demand in most end-uses either to stagnate or, in a number of cases, decline significantly . . .

Although the production of motor vehicles is cyclical (relying as it does on the underlying level of economic activity in general) and despite such factors as interest rates and consumer confidence, the trend is demonstrably positive. Not only that, but world vehicle population has continued to rise inexorably. Replacement batteries already account for 80-85% of the U.S. market and their share of the total battery market has risen steadily as vehicle populations have increased in other areas . . .

During the 1970s and early 1980s, the prevailing trend was towards using small batteries which required less lead. This resulted from technological improvements in battery design, and from the fact that more small cars were being built (particularly in the U.S.) in response to the oil crises. In recent years, however, battery weights have increased in order to accommodate the greater number of electrical appliances being fitted in cars. It is unlikely that this trend will be reversed.

We believe demand for lead will increasingly be underpinned by the battery sector, such that an average rate of growth of 1.5-2% is achievable during the next decade or so. Of course, the widespread acceptance of electric vehicles (EVs) would render this estimate rather conservative. Although other battery configurations are being tested, it seems certain that the first generation of EVs, be they pure or hybrid, will employ lead-acid batteries as their power source.

— From a recent issue of Billiton’s “Metals Weekly Report.”