From Institutional Investor:
As metals struggle, lead is back in vogue.
While everyone is debating the future of gold, silver, and copper after the dramatic mid-April sell-off and recent bounce to the upside, here’s an investable metal you seldom hear about: Lead.Here's the LME warehouse situation via Kitco:
Lead -- the stuff of auto batteries and bullets -- is in vogue with the metals analysts, with a raft of bullish price projections owing to exceptionally tight supply and healthy auto sales in the U.S. and China.
All of the metals – both precious and industrial – are down substantially since the start of 2013, but lead has been one of the worst performers. As of May 13, the quote on a three-month futures contract on lead at the London Metal Exchange was $2,008 a ton, down 13.8 percent year-to-date. And, yet, going into the second half, Bank of America Merrill Lynch metals strategist Michael Widmer, based in London, believes that lead has “some of the strongest fundamentals among the base metals.”
Widmer, who is the most bullish, is predicting that lead, which has seasonal demand, will rise to $2,550 a ton during the third quarter, and drop back to $2,400 a ton during the fourth quarter. “What you find is that normally, there are two key demand seasons, winter and then summer. It has to do with very hot and very cold weather, which damages vehicle batteries,” he said, noting that auto batteries account for about 80 percent of the demand for lead. The post-summer peak is in September, “when battery producers restock,” he said, while typically, the second quarter is the weakest.
Widmer is forecasting a full-year average of $2,363 a ton for 2013, higher than the commodities research team at Goldman Sachs and Societe Generale’s Robin Bhar, the firm’s head of metals research in London, with reports from both projecting $2,300 a ton as their 2013 average. SocGen is in agreement with $2,400 a ton as a good number for the fourth quarter, but its third quarter number is lower than BofA Merrill’s, at $2,250 a ton. Goldman has a more conservative near-range forecast of $2,150 a ton over the next three to six months.
There are a number of reasons why the demand for lead is rising, while growing the supply is problematic....MORE
