Lead continues to be strong performer

While the demand for lead continues to be firm, the market should remain well supplied with prices on the defensive for the rest of this year, international investment firm Shearson Lehman Hutton writes in a recent quarterly report.

The base metal, which averaged 18 cents (US) per lb in London for 1986 and 27 cents last year, was averaging 30 cents for the first eight months of 1988. A 28 cents average is predicted for the current year.

Supply disruptions, among other reasons, in 1986 and 1987 resulted in shortages of the metal and a doubling of the dollar price. “Since then, though , the lead market has been almost alone among the base metals in being reasonably well supplied. Inventories have gradually built up and a certain amount of downward pressure on prices has occurred even against the background of the bull market euphoria elsewhere,” Shearson writes.

In particular, copper and nickel prices took off this year, as did the price of aluminum. Zinc also followed suit, although that metal’s price rally took place later in the year. First-quarter weakness

Showing some weakness during the first quarter, lead rallied during the second quarter only to fall back during the summer months. Like the other base metals, lead experienced a move backwards in price, although Shearson points out that throughout, the spot price range was 7 cents and the 3-month price range only 5 cents . The Shearson researchers say lead may have been in slight oversupply early in 1988.

Demand, resilient in recent years, is expected to remain strong. Consumption growth continues this year, Shearson says, in the face of a better-than-expected economy world-wide and a strong performance from the automobile industry.

Car production (but not commercial vehicles) is expected to fall this year in the U.S., Canada and Germany but increase in Japan, according to Shearson. An encouraging note, the researchers say, is that commercial vehicles use larger batteries; a firm demand for original equipment batteries is expected to help buoy lead consumption this year. Also helping to absorb the lead supply is a housing boom in the United Kingdom, where lead is a roofing component.

On the negative side, the mild winter of 1987-88, both in North America and Europe, tended to dampen new demand for the metal from battery-manufacturers. The hot summer North Americans experienced this year, however, may have a positive short-term effect on the replacement-battery sector of the market.

Top lead mine producer in 1987 was Australia, at 456,000 tonnes; Canada was second at 414,000 tonnes. Among refined lead producer-nations last year, the U.S. led the way, followed by Japan and Australia.

Problems in Peru’s mining industry have altered Shearson’s predictions for 1988, that nation being among the top producers of lead. “Not only have strikes in the country’s mining industry been more persistent this year (including one recently which virtually shut the entire sector), but technical difficulties — stemming from shortages of foreign exchange to pay for spare parts — have worsened,” the researchers write. They add that a 15% drop in national production could occur.

In Canada, Pine Point Mines’ lead-zinc operation in the Northwest Territories has been closed permanently by the Cominco- controlled company. A strike this year at Curragh’s lead-zinc-silver Faro mine in the Yukon will probably reduce the national output, Shearson says.

Tightness of supply in the next few years is foreseen for germanium, reports Roskill of London in a new study.

Consumer demand for the metal is unlikely to be greatly in excess of supply during the next few years, the minerals marketing information firm writes. World reserves are adequate and existing refinery capacity can meet the expected growth in demand.

Competition between refiners for the available germanium-bearing raw materials is, however, expected to increase, and will exert upward pressure on prices, not only for residues and concentrates, but also probably on those for dioxide and metal.

Germanium is recovered largely as a minor byproduct of zinc or other metal mining, but supplies, Roskill says, are to some extent affected by the willingness of metal producers to recover germanium. The major factors in the competition for residues and concentrates are, however, the general lack of vertical integration in the germanium industry, the small tonnages of material involved and the relatively small number of producers and refiners.

World consumption of germanium was estimated to be 110-130 tonnes in 1987; demand is expected to grow to 1990. Among the uses to which germanium is put are as a component in infra-red imaging systems (mainly military), in optical fibres (tetrachloride) and in radiation detectors.