Lead
Lead is a base metal that is generally extracted while mining other metals. Most production goes to lead-acid batteries. This guide to trading lead gives an introduction to the market, from the factors that influence supply and demand to price outlooks. We also explain how to trade lead, including the best brokers and trading vehicles.
Top Lead Brokers UK
-
Interactive Brokers (IBKR) is a premier brokerage for experienced traders, providing access to 150 markets in 33 countries, along with a suite of comprehensive investment services. With over 40 years of experience, this Nasdaq-listed firm adheres to stringent regulations by the SEC, FCA, CIRO, and SFC, amongst others, and is one of the most trusted brokers for trading around the globe.
-
eToro is a top-rated multi-asset platform which offers trading services in thousands of CFDs, stocks and cryptoassets. Launched in 2007, the brand has millions of active traders globally and is authorized by tier one regulators, including the FCA and CySEC. The brand is particularly popular for its comprehensive social trading platform. Cryptoasset investing is highly volatile and unregulated in the UK and some EU countries. No consumer protection. Tax on profits may apply. 76% of retail CFD accounts lose money.
-
Fusion Markets is an online broker established in 2017 and regulated by the ASIC, VFSC and FSA. It is best known for its low-cost forex and CFD trading, although its multiple account types and copy trading solutions cater to a range of traders. New clients can sign up and start trading in 3 easy steps.
-
Trading 212 is a European and UK-regulated CFD broker that also offers stock investing and ISAs. It’s best known for its commission-free trading model and beginner-friendly app, which has helped it attract 2.5 million users and £3.5 billion in client assets.
Lead Trading 101
Lead is the fourth most commonly used metal. It was once an important material in plumbing, but today its main use is in batteries, most of which power vehicles. Some, though, power computers, emergency systems, and other machinery.
Lead has various other uses in manufacturing, from the compounds for the plastics and glass industries, to remote-access power systems.
Lead is primarily traded on the London Metal Exchange (LME) and the Chicago Mercantile Exchange (CME). Retail traders can invest in lead through several vehicles, including short-term derivatives like CFDs. Online brokers may also offer lead futures, options, stocks, and ETFs.
The cash price for lead on the LME from 2018 to 2022 ranged between the Covid-related low of 82.7 cents per pound in 2020 and 101.8 cents per pound in 2018. Aside from the 2020 dip, prices in this period have remained quite steady. In fact, lead trading prices have maintained relatively stable since 2010.
Lead Chart
Credit: TradingView
What Influences Lead Prices?
As with most commodities, the key trading economics that influence prices are variations in supply and demand.
Supply
One of lead’s advantages is that it can be recycled indefinitely without any reduction in quality. Because of this, secondary production of lead provides over half of the total world output.
Lead is in plentiful supply the world over, with over 40 countries mining it since the 1990s. China is by far the biggest miner and producer of lead, producing 4 times the quantity of its nearest competitor, Australia.
Australia however, has the world’s largest lead reserves, with more than 37 million tonnes. Asia has shown the greatest growth in production in recent years, while production has shrunk in Europe and remained stable elsewhere.
For lead to be useful it must also be smelted and refined, and more than 70 countries worldwide are involved in this endeavour. China is again the leader in lead refinement, with the US and Europe coming in second and third.
All of this means that many global factors affect the supply of useful lead, but developments in China will generally be the most significant.
Demand
Lead is in demand in five main product groups: batteries, munitions, rolled/extruded products, pigments, and radioactive shielding.
Although the battery market is gearing toward lithium-ion batteries, demand for lead-acid is still growing and is predicted to reach $84.46 billion by 2025. This is partly due to the growth in demand for consumer electronics in developing countries, so companies producing these technologies will be of interest to the lead trader. The growth of the electric car industry, with its key movers such as Tesla, should also be watched closely.
The metal is also valuable in the construction industry, where it can be rolled and extruded to form wires, rods, and other products. Such usage accounts for 6% of worldwide lead demand, even though some countries prefer zinc for these purposes.
Lead can also be used to manufacture various products in the pigment industry including paints, plastics, and lead glass. Around 5% of lead production currently goes into these applications, although lead use is declining as titanium dioxide is preferred in this sector.
Other areas of industry to watch for lead consumption are the medical and nuclear sectors, where lead’s shielding properties are highly valued. The role of lead in the manufacture of munitions also means a growth in demand during periods of major armed conflict.
Other Factors
Because refinement is needed for lead to reach its optimum value, high energy costs will affect the price of lead as production costs are passed on to the consumer.
High exposure to lead causes harm to human and ecological well-being, and government regulations are necessary to address this. Supply may be affected if China or another major producer introduces more restrictive regulations, and this could have a consequent effect on prices.
With so much of the world’s lead production located in China, the lead market is also susceptible to geo-political and economic factors such as trade agreements, sanctions, and fluctuating international levees and taxes that affect this country.
How To Invest In Lead
CFDs
Contracts for difference (CFDs) are a way to speculate on the price of lead without owning the physical metal. They are a straightforward way to trade and can be used with leverage, which boosts trading power but also heightens risk.
CFDs are one of the most popular and accessible ways for retail traders to speculate on commodities, as they don’t involve owning the underlying asset and are available at leading brokers.
Shares
Stocks in a company involved in lead extraction and production are one way to expose yourself to the price of lead. A difficulty here is that lead is mostly mined as a by-product of other metals. This means you will need to look at companies that include some lead as part of their production. These could include:
- Glencore – The world’s largest lead producer, whose operations include refinement, processing, and storage
- Vedanta Resources – With headquarters in the UK, the firm produces multiple metals, with further interests in power, oil, and gas
- Teck Resources – A Canadian-based mining company and one of the biggest movers in world metals
ETFs
Exchange-traded funds (ETFs) are a cluster of combined stocks (a selection of metal producers, for example) that are traded on an exchange as though they were simple shares.
Popular lead ETFs include WisdomTree Lead (LEED), which is traded on the London Metal Exchange (LME).
Lead Futures
Futures trading involves legal agreements to buy or sell lead at a predetermined price at a specified time in the future. These futures contracts enable the investor to speculate or hedge upon the price direction of lead, and can be traded with leverage.
Retail traders can look for futures contracts that can be cash settled on expiry by rolling forward to a new contract or by exchange for a spot trade. This way, they will avoid being obligated to take physical delivery of the lead, which could entail significant costs for delivery and storage.
Lead Options
Options operate similarly to futures, the difference being that the contract offers the right but no obligation to exercise the trade at expiry. This means that if the price of lead moves against the trader’s prediction, their losses will be limited to the price of the option contract.
Outlook For Lead
Lead prices recovered after the steep market decline during the Covid-19 pandemic, though its performance in 2020 was not as strong as that of other base metals.
This was partly due to higher US yields (supply) and a downbeat automotive industry (demand). The price has since recovered as demand in China has remained firm and automotive production regained confidence and momentum.
Summer 2022 saw the expected seasonal price decline due to reduced demand for lead batteries. Since then, prices have returned to similar levels as in 2014.
Current fundamentals affecting supply and demand patterns suggest relative stability in the immediate future, though the phasing out of lead-acid batteries to meet sustainability goals could impact markets in years to come.
Lead Trading Times
Lead is traded primarily on the London Metal Exchange (LME) and the Chicago Mercantile Exchange (CME).
Trading hours for the LME are from 1pm to 7pm GMT. Ring trading takes place from 11:40am to 5pm GMT.
Ring sessions for lead specifically are 12.05 to 12.10pm, and 12.45 to 12.50. Kerb trading for lead ceases at 4.20pm.
Numerous exchange holidays also occur, which can be checked on the LME website or your trading broker.
Bottom Line On Trading Lead
Lead is a useful base metal that is found and refined the world over, though principally in China, which is both its main producer and consumer. As one of the most widely used metals in the world, the outlook for lead depends on the strength of the world economy in general, but specifically on the state of the automotive industry and other sectors that demand lead.
The best lead brokers facilitate speculation on price movements through derivatives such as CFDs, futures and options.
FAQ
How Can I Trade Lead?
Individuals can invest in lead by buying shares in mining and refining companies that deal in the metal, or through derivatives such as futures, options and CFDs. Your trading strategy and investing horizon will impact the product you use.
Is Lead A Good Investment?
Evolving global market conditions will determine whether or not lead is a good investment. The metal’s price movements depend in large part on the strength of the main sectors that use the metal, such as the automotive industry.
Generally speaking, strong economic performance from developing countries will lead to an increase in demand for products that contain lead, driving prices higher.
Is Lead An Ethical Investment?
The health and environmental risks of physical exposure to lead are well known. It is, however, a relatively sustainable resource as it can be recycled.
What Should I Look For In A Lead Broker?
Each trader will have their own specific criteria when choosing a lead broker. Factors to consider include access to lead products such as CFDs, futures, options, and stocks, UK regulations, fee and zero-commission structures, plus the trading platform and app on offer.
Article Sources
U.S. Geological Survey, Mineral Commodity Summaries (2023)