lead ON THE WAY DOWN

Lead consumption has been hurt by the auto slump in the U.S. this year. New car sales in the U.S. were down 7.2% in the first half of 1989. Battery shipments to the automakers should be down dramatically in the second half of 1989 as they have scaled down production plans to their lowest level since the early part of the decade.

The offtake for replacement batteries should, however, remain normal. In fact, replacement battery demand in Europe so far this summer has been unseasonably strong. Consumption to Drop

We expect worldwide lead consumption to drop more than 2% in 1989 to 4.25 million tonnes and a further 3.5% in 1990 to 4.1 million tonnes.

On the production side, record zinc prices are encouraging zinc miners to maximize by product lead output. The usual quota of strikes and natural disasters has served to moderate this output. The chronic short supply of battery scrap has also tended to restrain production.

We expect worldwide lead production to increase just over 0.5% in 1989 to 4.4 million tonnes and a further 4.5% in 1990 to 4.6 million tonnes.

Worldwide refined lead inventories in producers’ hands currently stand at 163,000 tonnes, or less than two weeks of supply. This is not an unusually tight situation for the lead market since much of the inventory is actually held in the form of battery scrap, which is not reflected in the refined lead inventory figures. With the weakness in the auto market and the surge in mine supply expected in 1990, we are projecting producer lead inventories to rise to 265,000 tonnes by year-end 1989 and 765,000 tonnes by year-end 1990.

The U.S. producer price of lead rose steadily from an average of 19 cents per lb in 1985, 22 cents per lb in 1986, 36 cents per lb in 1987 and 37 cents per lb in 1988, peaking just above 42 cents per lb in December, 1988. It pulled back to the 35 cents per lb level due to seasonal factors in March. Supply disruptions and continued strong battery demand have since propelled lead back to the 42 cents – per-lb level. Shortlived Rally

We expect the most recent rally in lead prices to be shortlived, however. Th e twin forces of slumping auto sales and new mine production will bring lead back down to 38 cents per lb by year- end 1989 and 28 cents per lb by year-end 1990. Our average price expectation for 1990 is 32 cents per lb. Vay Jonynas, M.B.A., C.F.A., is a mining analyst with Moss, Lawson & Co.

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