Lead and Zinc
A study by Wood Mackenzie forecasts that global lead production, excluding that of China, will increase in 2019 by about 250 kt, which is equivalent to over 10% of current output.
According to the market analyst, approximately 90 kt are due to stem from Goldcorp's (TSX:G) (NYSE:GG) Peñasquito, thus, developments at the Mexican mine will have a major bearing on whether the overall increase actually materialises.
Given the importance that just one actor has, WoodMac says that its prediction should be taken with a grain of salt as Goldcorp updates its lead production guidance in its quarterly reports, and it trimmed its 2018 projection by 22% in October in order to reflect a delay to the increase in output in H2 2018.
The market researcher believes that Glencore's (LON:GLEN) Australian mines will also produce more lead in 2019.
According to the report, such an increase would be the result of the start-up of Lady Loretta in Queensland, whose contribution to the company's lead output started to show in Q3 2018.
WoodMac is cautious when it comes to predicting whether there will be any lead coming out of the Anglo-Swiss miner's McArthur River project in the Gulf of Carpentaria.
"It was initially abandoned in 2015 due to the need to re-design the waste rock dump as a result of the operation generating more non-benign waste rock than expected. Will the re-design be an immediate success? Increased production was envisaged in Q4 2018 and so we should soon have some idea about how it is performing," the document reads.
When looking at China, the market researcher sees a lot of uncertainty regarding the Asian giant's lead production and its ability to respond to its own needs in a context of environmental inspections and the closure of facilities failing to meet regulations.
In the view of Wood Mackenzie, if China turns to the rest of the world for refined lead supply, this could unveil the real situation regarding the actual availability of the mineral at a time when exchange stocks are at their lowest for almost a decade.
"China remains the dominant player for both lead production and consumption, and the slowing of the Chinese economy and fall in automotive production will not substantially change that. What is less certain is the ability of China to supply its own lead demand," the analysis states.
The reason why the research firm doesn't see the drop in China's auto production impacting lead demand is that the need for replacement automotive batteries is expected to remain high given that car ownership reached 240 million units by the end of 2018, rising by 10.5% from 2017.
Electric vehicles are another reason why China's and the rest of the world's demand for lead is expected to rise.
WoodMac's data suggest that for the first time, annual global EV sales exceeded 2 million in 2018, with roughly half in China.
"EVs still use lead batteries. Lithium-ion (or sometimes nickel-metal hydride) batteries provide the energy to power the EV, but the lead battery provides the energy to control the EV," the market researcher's report explains.