Lead imports set to fall on rising global prices

NEW DELHI: India’s imports of primary lead are likely to fall by as much as 10% this year as record prices of the metal prompt more buyers to switch to cheaper batteries bought from local recycling firms. Battery makers have so far been able to pass on the rise in the price of imported lead to consumers.

But traders and analysts say the domestic market would find it difficult to pass on any further increases, forcing importers to reduce purchases and Indian battery buyers increasingly relying on batteries from backyard workshops. “So far, we have been able to pass on the lead price increase to customers,” said Amara Raja’s chief financial officer K Suresh, adding “How far the users would be sympathetic to the increase is anyone’s guess.”

India consumes about 350,000 tonnes of lead annually. Imported primary lead accounts for 40-50% of demand, domestic lead firms contribute 15-20% and the rest comes from recycled sources. Lead for delivery in three-month on the London Metal Exchange has risen around 120% so far this year to an all-time high of $3,645 a tonne, as production problems across the world and limited stocks have raised supply concerns. Stocks of lead in LME warehouses stood at 22,350 tonnes — October last year.

“When the price of lead goes so high, it is bound to affect the demand to an extent,” said L Pugazhenthy, executive director of the Indian Lead Zinc Development Association. The average price of a good quality car battery in the domestic market could range from Rs 2,000 to Rs 8,000, depending on the automobile model. Prices have risen by 20 to 30% over the last one year. Automobile batteries contribute to about two-thirds of the lead consumed in Indian domestic markets. At least 10 kg of lead is used in each automobile battery.

Battery sales to original equipment makers, such as car manufacturers, have slowed, Mr Suresh said. High prices could also prompt users such as truck and cab drivers to look for batteries made by small firms that scavenge old batteries for raw material. “Those buying batteries may think of buying later,” said a senior industry official, who declined to be identified, adding “It will give a boost to recycled batteries, simply because they are cheaper.”

But the biggest challenge facing the market in the recycled market is the quality of batteries produced. “There are a few players who produce good quality recycled batteries but the majority run shoddy operations which are not environmentally friendly,” the industry official added. He said these firms were reluctant to switch to new production technology because of the costs involved. “Central Pollution Control Board has been trying to streamline the operations of the recycling industry. But it is a tough job and enforcement is weak,” he added.

Nearly 30% of lead demand for car batteries is met from recycled material. Many of these firms operate backyard units and churn out low quality products. Industry officials said if prices remain high during the winter months, the domestic market would see a boom in demand for recycling material. “Some are saying that lead prices will touch $4,000, which is unheard of,” said PN Mago, general manager of Indian Lead, adding “The replacement demand for batteries are bound to increase during the winter months.”