Lead supply keeping pace with demand

It hasn’t been such a bad year for lead during these profitable times of higher prices for base-metal commodities, with the metal averaging about 29 (US) per lb on the London Metal Exchange so far this year. Not spectacular, but respectable.

And next year isn’t expected to be much different.

“Lead is likely to continue to be a dull performer,” says investment dealer ScotiaMcLeod in a recent publication titled Mining Investment Perspectives.

An average of 29 is expected for 1988, with a 31 price forecast for 1989. Lead in 1987 averaged 27 and in 1986 struggled at 18 . (LME prices are not to be confused with the higher North American producer prices, which have been in the 38 range.)

ScotiaMcLeod says lead production next year will likely be relatively stable, with demand increasing only slightly. “Important lead markets are still contracting, particularly the leaded gasoline market in Europe where government regulations require gradual reductions in leaded gasoline use through 1990,” write the company’s analysts.

Stable inventories (that is, staying elevated) are also foreseen for 1989. Battery sales up

Demand for lead in the non- Communist world during the first five months of this year was a healthy 3.5%, thanks in large part to replacement automotive battery sales.

Also rising during the first half of the year, by 2.7%, was production of refined lead. The surplus of the base metal was thus maintained, with little movement noted in the price.

On the supply side, little change is anticipated to the end of 1989, unless the weather acts up during the winter or some unforeseen supply disruptions occur. New capacity is expected to increase, but not by a great amount. ScotiaMcLeod points out Asarco in the United States has its new West Fork mine running near capacity and that company has also re-opened its Sweetwater mine.

Demand for lead in the non- communist world should rise by about 1.5% next year, with production to increase by about 1.2%, ScotiaMcLeod predicts.

In terms of mine production of lead, Canada is among the leading nations, in a group including Australia, the U.S., Mexico and the U.S.S.R.

Base-metal producers have been enjoying good times of late, with the markets rewarding them with handsome profits. The business, however, is cyclical, and it was only a few years ago when some of those same companies were hanging on for their lives.

Planning for the future, then, becomes a difficult task, and the commitment to spend large amounts of money over long periods of time is not something to be taken lightly. Making this point earlier in the year at a London conference sponsored by Metal Bulletin was Inco’s vice- president marketing, Peter Salathiel, who talked of the awesome risk involved. In his paper, an edited version of which appeared in Metal Bulletin Monthly, Salathiel used the example of nickel resources, of which there appears to be no shortage.

“It is one of the more abundant elements in the world; development simply takes time and money. The latter can be substantial. A ballpark figure for a 50-million-lb-per-year greenfield project is $500 million dollars,” he said.

“Assuming, perhaps optimistically, a 20-year life, interest and depreciation alone would run to $1.50 per lb which, coupled with cash operating costs of say $2 per lb would mean that potential investors would require a $3.50 per lb nickel price each and every year for 20 years — and not just at the top of the cycle.

“And this, if realized, would merely give the investor a return equivalent to putting his or her money in risk-free treasury bills.”

Recently announcing its entry into the waste management field was American metals producer Asarco. The company says a wholly- owned subsidiary has receiv ed regulatory approval for the operation of a commercial hazardous and nonhazardous industrial waste facility in Corpus Christi, Texas.

To be recycled primarily are inorganic wastes including those defined by regulatory authorities as corrosive, characteristically hazardous and reactive. Metals, minerals, cyanides, acids and bases will be processed from industrial waste using chemical processes for separation.

Initial focus will include the plating, electronic, metal finishing, chemical and petrochemical industries. The company says recovered materials will be sold to industry for re-use.