COLUMN-Lead, a market desperately seeking a good story – by Andy Home (Reuters India – January 9, 2015)

Jan 9 (Reuters) – Lead was the second worst performer among the major industrial metals traded on the London Metal Exchange (LME) last year. It was close but copper, which came under sustained bear attack over the closing weeks of 2014, just pipped it for the booby prize.

Unglamorous lead is now trading consistently below the $1,900-per tonne level, its weakest performance since the third quarter of 2012.

It’s also trading at a discount of more than $300 per tonne to “sister metal” zinc, so called because both have historically been produced at the same mines.

Trading lead and zinc as a relative value pair is a favoured past-time on the LME “Street” but the gap between the two is now as wide as it’s been since the end of 2008.


Lead’s relative under-performance has caused a good deal of head-scratching among analysts. Or at least those analysts who still care, because this market’s real stand-out feature over the last year or so has been collective apathy.

LME lead volumes slipped another 0.5 percent last year after tumbling by 9.4 percent in 2013. It was the only major LME-traded metal to have experienced two consecutive years of lower trading volumes, something of a stand-out given total volumes grew by 6.7 percent in 2013 and by another 3.5 percent in 2014.

Even more stark has been the decline in open interest. It has been falling steadily since August last year and is currently grinding along at levels that have defined this market’s apathy low points over the last couple of years.

Lead’s problem is quite simple. It has no narrative.


Markets love a good story. And in commodity markets the story tends, as often as not, to come from the supply side.

Copper, for example, is currently the bears’ play-thing because of an expected swing to surplus this year as mine and refined supply overwhelm demand growth.

Zinc is in favour because of its compelling narrative of closing mines and resulting shift to raw materials deficit.

It doesn’t necessarily matter whether the narrative is “true”. What matters is that there is a narrative at all.

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