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Lead contract structure still unclear

Keywords: Tags  lead premium, 2013 lead contracts, cost plus, LME plus, primary lead, secondary lead, junk batteries, pricing structure prices


NEW YORK — Lead consumers and sellers have yet to reach any kind of resolution regarding the pricing structure of 2013 contracts, with market participants reporting that some deals may be done on a month-by-month basis instead of on an annual basis.

The spot premium continued to trade at a record high range of 14 to 16 cents per pound last week, with traders reporting that most activity was focused on contract negotiations for 2013.

“It’s been a month since LME Week, so these things should be getting close to done between now and Thanksgiving (Nov. 22),” one broker said.

The two sides remain divided over how to structure such contracts ( amm.com, Oct. 29). Most secondary lead producers are pushing for a “cost-plus” system, which would account for their junk-battery acquisition and processing costs. Most brokers and consumers still favor a model based on London Metal Exchange pricing.

“I don’t think this cost-plus approach will work out as quickly as the secondaries want,” a second broker said. “Our customers are so used to being LME-plus that it will take a lot of time to train them about this concept.”

The ongoing standoff means that some parties may opt for contracts that don’t cover the entirety of 2013.

“Some people are talking about going for just parts of 2013,” the first broker said.

“Either they’ll go right to the end of December or just throw up their hands and do it on a monthly basis,” a third broker said
London Metal Exchange lead prices have increased since mating season began during LME Week in mid-October.

Three-month lead traded at $2,150.5 per tonne (97.5 cents per pound) in the official session on the London Metal Exchange Monday down from $2,119 per tonne Oct. 17.

The recent strengthening of the lead price has lead to the disappearance of some higher spot premiums, according to the third broker who previously said he’d sold at numbers as high as 25 cents per pound.

“Premiums are not near 25 anymore, they’re 15....15 is the bottom for the market,” he said.

Secondary lead producers had argued that a change in the pricing structure was necessary on account of rising production costs due to high junk battery prices. In some cases secondary lead producers’ costs were exceeding the LME price, market participants told AMM ( amm.com, Oct.1).

Free market junk lead-acid battery prices dropped to their lowest level since March last week as demand eased and supply increased as winter approaches ( amm.com, Nov. 7).


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