Lead Recovers From 14 Month Lows, Inventories Show Declining Trend

Lead prices managed to recover from their 14 month lows on better employment situation in the United States and some corrective phases in Dollar against the Euro. Inventories of lead showed declining trend in November though on a yearly basis it was still high. In November, the overall inventories was down by 5.3% though on a yearly basis the inventories have gained 75%. Situation of production was good in lead even as consumption levels remained quite weak in emerging markets.

India reported decline in vehicle sales numbers at the time when markets remained glued to debt situation in the west. Vehicle sales in other part of the world were also not cheering. Indian Lead markets moved forward on the back of some strong trendline supports and retracements from the lows of Rs. 88 in October. The markets managed to surpass Rs. 100 per kg in November and maintained the momentum in early December.

Exide, a major player in batteries said that the decline in automotive vehicle segment and lower demand for inverter batteries was affecting its financial performance. Managing Director and CEO of Exide Industries Ltd, Mr T.V. Ramanathan said, “The demand growth that was seen in the country’s automotive industry over the last several quarters has not been sustained, resulting in lower Original Equipment (OE) demand. The prevalent power supply situation and pleasant weather conditions in the north Indian markets also resulted in a lower inverter battery sales.”

The decline in vehicle sales is negative for the contract is short run though easing rate regime will bring back demand in coming months. Early resolution of Eurozone crisis will be a welcome. In December, the demand for lead is expected to remain dull due to Christmas and New Year celebrations when traders like to sit on cash and avoid further fresh positions. The initiation of January is likely to bring global rebalancing of funds in lead. This can help Lead rise during that time, bearing in mind that LME lead has declined by 18% in 2011.