The premium lead buyers will pay in Europe this year almost doubled from 2012 on rising raw material costs, according to four traders with direct knowledge of the sales.
The premium is 100 euros ($130) to 150 euros a metric ton in Europe, said the traders, who asked not to be identified because they aren’t authorized to speak to the media. The fee, which includes delivery costs, compares with 60 euros to 80 euros a ton last year, according to research company CRU.
The premium is added to prices on the London Metal Exchange and is for metal that is of 99.97 percent purity. Futures for delivery in three months rose 4.7 percent in the past month. Some lead buyers in the U.S. will pay premiums of 10 cents to 15 cents a pound ($220 to $331 a ton), three other traders with direct knowledge of the sales said. The surcharge was 5 to 5.5 cents last year, according to CRU.
Lead production from recycling accounted for about 48 percent of refined metal output last year, according to Morgan Stanley. Prices for battery scrap reached as much as 45 percent of the LME price last year in Europe, increasing costs for those smelters that recycle battery junk, according to Neil Hawkes, an analyst at CRU in London.
“Smelters have been squeezed to the point where they weren’t really getting any margin,” Hawkes said by phone yesterday. “This increase in the premium is to try and push them back into the black.”
Most lead in Europe is sold through annual contracts, according to research company Wood Mackenzie Ltd. The premium for lead for immediate delivery in Europe rose to $80 to $100 a ton in January from $70 to $90 at the start of December, the traders said. The surcharge is for metal in Rotterdam warehouses.
“Demand is still holding up pretty well but I don’t think there’s been too much of a lift from the winter season so far,” Hawkes said. Europe accounted for 15 percent of global demand last year and the U.S. 14 percent, according to Barclays Plc.
Stronger demand for industrial batteries used in wireless networks and “cloud” computing in Europe has partially offset “sluggish” demand from the auto sector, Daniel Brebner, an analyst at Deutsche Bank AG in London, said in a report yesterday.