* Lead consumption numbers downgraded
* Deficit years to give way to surplus years
By Pratima Desai
LONDON, Oct 18 (Reuters) - Unexpected shortages of lead due
to supply disruptions have helped prices of the car battery
metal to outperform other metals such as copper, aluminium and
zinc, but looming surpluses mean this trend is unlikely to
persist.
Benchmark lead on the London Metal Exchange at
around $2,200 a tonne is up nearly 9% so far this year compared
with losses of 3%, 7% and 25% for copper, aluminium
and zinc respectively.
Prices of industrial metals overall are under pressure from
the protracted trade dispute between the United States and
China, the world's two largest economies, which has weighed on
growth, industrial activity and demand.
Behind lead's ascent to 15-month highs above $2,200 a tonne
is Nyrstar's Port Pirie lead smelter in Australia, which halted
production in May. It produced 160,000 tonnes of lead last year.
In a recent production report, Nyrstar said lead output at
51,000 tonnes in the first half of the year was down 27% for the
same period last year. Analysts expect Port Pirie to produce
only 90,000 tonnes of lead this year.
Nyrstar declined to comment.
"Lead has been a star performer largely because of Port
Pirie. But this year we are at a transition point, going from
four years of deficits to five maybe six years of surpluses,"
said Wood Mackenzie analyst Farid Ahmed.
Ahmed expects prices to average around $2,000 a tonne next
year and nearer $1,900 a tonne in the years after.
"We've downgraded our consumption numbers through the year
as the U.S.-China trade war dragged on and despite Port Pirie,
we see a market moving into surplus which will put pressure on
lead prices, but we don't see a price collapse."
Historically, lead is seen to be recession-proof as during
cold weather more batteries need to be replaced and this is
exacerbated by weak growth when many people and firms decide to
replace batteries rather than purchase new cars and trucks.
Global auto sales are seen down 3% this year, according to a
forecast developed jointly by J.D. Power and LMC Automotive.
"With trade uncertainty in the backdrop, global risks could
pull down the U.S. economy, and with it, auto demand next year,"
said Jeff Schuster, President, Americas Operations and Global
Vehicle Forecasts, LMC Automotive.
Analysts expect lead demand to remain unchanged or shrink
this year, for the first time since the 2008 financial crash.
Global lead demand is estimated at around 12 million tonnes.
More than 85% of that will be used to make batteries, most
of them destined for the auto industry, sales of which have been
falling in many countries around the world.
"We thought 2019 would be a surplus year. We are now
forecasting a deficit of 50,000 tonnes this year, but the final
number will depend on whether Port Pirie comes back soon," said
CRU analyst Neil Hawkes.
"Losses at Port Pirie and other smelters have been partially
offset by weaker demand, but we are going into a seasonally
strong period for lead demand so prices should be supported."
Adding to lead shortages is Glencore's Belledune
smelter in Canada where workers have been on strike since April.
It produced 76,000 tonnes last year and is expected by analysts
to produce 50,000 tonnes this year.
Glencore declined to comment.
Draws on lead stocks at LME registered warehouses, below
70,000 tonnes and down nearly 20% since Aug. 1, also suggest
supply falling short of demand, traders say.
But they say that the lead in LME warehouses does not meet
the quality requirements of the battery industry and that it
needs to be resmelted.
"Speculators are long of lead, for now," one trader said.
"But the lead in LME warehouses isn't really fit for purpose,
can't really be used. Unless someone bothers to clean it up, it
will probably show up again somewhere else."
(Reporting by Pratima Desai, additional reporting by Mark
Potter, editing by Louise Heavens)
Glencore (GLEN)