Lead balloon rises.

Panelists at the Institute for Scrap Recycling Industries Inc. (ISRI) Annual Convention Spotlight on Lead and Zinc looked at lead and zinc as they relate to other LME metals and at China's role in the metals' fundamentals.

Joseph Spiciarich of Penoles Metals and Chemicals Inc., Stamford, Conn., said China will likely surpass the U.S. in lead consumption in 2005. Although U.S. primary lead production is declining, recycled production is slowly increasing thanks to the high rate of battery recycling in the country, he told attendees of the ISRI Convention, which took place in late April in Las Vegas.

U.S. consumption of lead is declining largely because battery production is moving to Mexico and the Pacific Rim, Spiciarich said. Lower labor costs and legal and health concerns have precipitated this migration in manufacturing.

However, Spiciarich did not paint a muted picture for lead. He predicted that lead usage will grow because the metal has no substitute in transportation batteries. He said electric vehicles, which require larger batteries, are a growing segment of the transportation market.

Despite this good news, he did point out a number of challenges to the industry, such as inadequate investment in exploration, mining and smelting as well as lead's negative image.

Zinc fares better than lead because it does not suffer from the same PR problems, Spiciarich said, though it does take a long time for demand-related information to get from the smelter to the miner.

China is the top zinc producer, he said, as well as the top consumer of the metal. The U.S. produces less than a third of the zinc it consumes, with most of the balance coming from Canada and Mexico. The U.S. is home to only two zinc producers, both of which are foreign owned, he added.

Peter Kettle of the CRU Group, London, said that the LME is close to its earlier peak in the mid-90s, thanks to the growth of China's economy and to increasing investments in commodities.

He said that the lead/zinc sector shows poor consumption growth and slow reactions to the supply and demand relationship. While Chinese consumption of lead/zinc grew 12 percent to 13 percent in the last year, it is the slowest growing part of the Chinese metal economy, Kettle added. However, China is the top Asian battery exporter, showing 87 percent growth last year, he said.

Kettle added that consumption is not an issue for zinc, but it is for lead, with supply deficits forecasted for the coming year. "Over optimism has to be guarded against in the industry," he cautioned.