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[LONDON] The global lead market this year is likely to see a bigger surplus than previously expected due to falling consumption in top user China, where slower growth means weaker demand for electric bicycles and cars, a quarterly Reuters survey showed.
The median of nine forecasts showed the lead market would have a surplus of 21,000 tonnes this year. A deficit of 29,500 tonnes is forecast for 2016.
The April survey forecast a surplus of 2,500 tonnes this year and a deficit of 50,000 tonnes in 2016.
Lead is used in batteries that power China's electric bicycles, a popular mode of transport in the country.
"Chinese demand is likely to be weaker than we had thought," said Sergey Raevskiy, metals research analyst at SP Angel. "That's partly because of the equity market crash, but demand was already looking weak." Economic slowdown and worries about a hard landing in China have hit prices of industrial metals this year.
Chinese equities have risen from an earlier collapse, but are still more than 20 per cent below the record highs seen in the middle of June.
China's car sales fell to 1.8 million units last month, down 2.3 per cent from a year earlier.
Chinese lead consumption, at 1.68 million tonnes in the first five months of 2015, was 3 per cent below that seen in the same period of last year, according to the International Lead and Zinc Study Group.
Global consumption between January and May was 4.2 million tonnes.
Analysts also expect China's lead exports to rise further in the second half of 2015. Official data shows Chinese exports of refined lead rose to 26,483 tonnes in June, up 69 per cent from a year earlier.
Forecasts for the lead market balance this year range between a surplus of 56,000 tonnes and a deficit of 60,000 tonnes. For 2016, the range runs from a surplus of 14,000 tonnes to a deficit of 200,000 tonnes, a forecast made by Deutsche Bank analyst Grant Sporre.
"The key thing for next year is fairly slow mine production," Mr Sporre said. "The reason for that is that you've got some big zinc mines like Lisheen and Century that are closing next year."
Lead is a byproduct of zinc.
Vedanta's Lisheen mine in Ireland is due to close in October, while all mining and processing activities at MMG's giant Century zinc mine in Australia are due to end this year.
Lead prices on the London Metal Exchange are forecast to average US$1,900 a tonne this year and US$2,097 in 2016, the poll showed. The cash contract is trading around US$1,750 a tonne.