{"id":71485,"date":"2015-04-24T05:13:19","date_gmt":"2015-04-24T09:13:19","guid":{"rendered":"http:\/\/countingpips.com\/?p=71485"},"modified":"2015-04-24T07:28:47","modified_gmt":"2015-04-24T11:28:47","slug":"lead-futures-reach-new-highs","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2015\/04\/lead-futures-reach-new-highs\/","title":{"rendered":"Lead Futures Reach New Highs"},"content":{"rendered":"
April 24, 2015<\/div>
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By WallStreetDaily.com<\/u><\/a> \"Lead<\/p>\n

By Shelley Goldberg<\/a>, Commodity Strategist<\/em><\/p>\n

We\u2019re all on the lookout for buried treasure \u2013 the priceless antique sitting unnoticed in your attic, or maybe a stack of cash stashed away in your wall.<\/p>\n

Few of us ever find it, but perhaps that\u2019s because we\u2019re looking in the wrong place\u2026<\/p>\n

Consider the metals market, for instance. From gold to palladium and aluminum to zinc, metals have been basically flat \u2013 experiencing the occasional downward trend.<\/p>\n

No, we\u2019re not seeing many trading opportunities coming from the mining sector<\/a>.<\/p>

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<\/a>\r\n\t Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p>

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There is one metal, however, that\u2019s actually on the up-and-up. And you probably have a valuable store of it sitting right in your driveway.<\/p>\n

I\u2019m talking about lead\u2026<\/p>\n

Sharpen Your #2 Pencils<\/h2>\n

Indeed, the lead futures markets have awakened, creating some great investment opportunities while the rest of the metals sector is stagnant.<\/p>\n

Notably low and falling, inventory levels on the London Metal Exchange (LME) are the cause of the price spike.<\/p>\n

You see, LME \u201cfree stocks,\u201d or live warrants, dropped dramatically just over the past month. On March 19, they were at the lofty level of 224 kilotonnes (kt). But now the total is under 94 kt, while Shanghai deliverable stocks stand close to a mere 50 kt!<\/p>\n

Now, some may argue that we\u2019re not yet at record lows. They\u2019re thinking of the period between 2004 and 2007 when LME warehouses were almost totally void of lead on several occasions. But that was also when China\u2019s gross domestic product was growing at a double-digit pace. The Chinese were consuming every commodity they could get their hands on.<\/p>\n

But, boy, have things changed\u2026<\/p>\n

According to recent estimates from Wells Fargo CTA Commitment of Traders, the market is net short 15%, with a capacity of 30,000 lots (or 750,000 metric tonnes). These shorts will eventually have to cover their positions.<\/p>\n

This is a sensitive time for lead now, too, as the industry is worried about future supplies\u2026<\/p>\n

The Heavy Metal Environment<\/h2>\n

Mining and smelting lead ore is a dirty business. And, in the United States, environmental issues weigh heavily on the industry.<\/p>\n

Privately held Doe Run, the leading U.S. lead producer, was forced to close its primary lead smelting facility in Herculaneum, Missouri, which had been in operation since 1892, at the end of 2013. The company felt it would cost too much \u2013 approximately $100 million \u2013 to install the pollution control technologies mandated by the Clean Air Act that reduce sulfur dioxide and lead emissions.<\/p>\n

What\u2019s notable about that occurrence is that the Doe Run smelter was the last primary lead smelter in the United States. Since 2013, there\u2019s been no U.S. facility to process lead ore.<\/p>\n

Currently, all lead produced in the United States comes from secondary smelters using recycled materials. The majority of the lead used by ammunition manufacturers, for example, comes from recycled car batteries.<\/p>\n

Only about a dozen secondary smelters remain in operation to process and recycle lead. But the U.S. Environmental Protection Agency could potentially take them out, too.<\/p>\n

So what does this all mean? Well, it\u2019s good news for the environment. But it\u2019s not the best for lead supplies, meaning prices could go up, up, up.<\/p>\n

\"Lead<\/p>\n

Put the Pedal to the Metal<\/h2>\n

Lead\u2019s high recycling rate means that it\u2019s likely to play a growing role in solving the world\u2019s future energy challenges. Doe Run anticipates increased demand for lead-based batteries to power vehicles, provide renewable energy storage, and telecommunications.<\/p>\n

In fact, approximately 90% of the lead Doe Run produces ends up in lead-acid batteries, one of the most recycled products in America. Lead-acid batteries also dominate the smaller, fully electric vehicles and micro-hybrids market.<\/p>\n\n\n\n
Editor\u2019s Note:<\/strong>\u00a0There\u2019s another substance hiding right under your nose, but this one is of a more sinister nature. In fact, the United States spends 75% of all its healthcare dollars fighting the effects of it. But now, there may be a solution. Read more<\/a>.<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Lux Research reports that micro-hybrids will grow nearly eight-fold to 39 million vehicles by 2017, creating a $6.9-billion market for energy storage devices, like lead-acid batteries.<\/p>\n

On top of that, governments and utility companies are continuing to invest in and grow solar and wind power. The key to making this kind of weather-reliant energy production viable is storage, such as in rechargeable lead-acid batteries.<\/p>\n

As smaller portion of lead\u2019s demand comes from its use in weatherproofing roofs, soundproofing rooms and buildings, shielding from X-ray radiation, and transporting and storing nuclear power. The last of which is also on the rise in Asia.<\/a><\/p>\n

The questions now is whether the amount of recyclable lead is sufficient to meet rising demands.<\/p>\n

Don\u2019t Be a Lead Foot<\/h2>\n

While China is by far the largest global producer and consumer of lead, its growth rate is at 25-year lows, and the country is now in full-fledged stimulus mode.<\/p>\n

Over this past weekend, the People\u2019s Bank of China cut the\u00a0reserve requirement ratio (RRR) by a full percentage point to 18.5% starting on April 20. While the RRR cut gives banks more low-cost cash at their disposal, the real financing cost remains high, given the decline in producer prices.<\/p>\n

As such, China will continue to be prudent with its monetary policy. Surely the impact of an RRR cut should boost confidence in the markets, but this goes squarely against encouraging any short-selling here.<\/p>\n

Instead, this is clearly the accommodative practice of buying extra time and kicking the can further down the road. \u00a0<\/strong><\/p>\n

In the end, long futures holders need to be patient, as the lead market may face some headwinds before it makes its grand leap forward. Technically, there is resistance and an upside target of $2,120 per metric tonne.<\/p>\n

The message here is to be tactical.<\/p>\n

Don\u2019t be a lead foot by driving fast and forward into a long position. Scale into the market on dips, keep an eye on LME and Shanghai inventory levels, and check out the options markets when volatility spikes or dips provide opportunity.<\/p>\n

Good investing,<\/p>\n

Shelley Goldberg<\/p>\n

The post Lead Futures Reach New Highs<\/a> appeared first on Wall Street Daily<\/a>.<\/p>\n

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 <\/p>\n","protected":false},"excerpt":{"rendered":"

By WallStreetDaily.com By Shelley Goldberg, Commodity Strategist We\u2019re all on the lookout for buried treasure \u2013 the priceless antique sitting unnoticed in your attic, or maybe a stack of cash stashed away in your wall. Few of us ever find it, but perhaps that\u2019s because we\u2019re looking in the wrong place\u2026 Consider the metals market, […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-71485","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/71485","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=71485"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/71485\/revisions"}],"predecessor-version":[{"id":71507,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/71485\/revisions\/71507"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=71485"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=71485"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=71485"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}