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‘Cost-plus’ lead contracts a must: smelter

Keywords: Tags  junk battery prices, London Metal Exchange, 2013 lead contracts, lead contracts, cost-plus, LME-plus, Daniel Fitzgerald

NEW YORK — A secondary lead refining company has confirmed that it signed a series of 2013 contracts using a “cost-plus” pricing model, saying that it wouldn’t be able to “stand the losses that (it) had last time.”

A company representative told AMM that it “did not sign any contracts for 2013 based on the London Metal Exchange,” with all of its new contracts either “based off costs or a conversion agreement.”

Negotiations for 2013 contracts between lead producers and consumers were fraught in the fourth quarter of 2012 as producers pushed for a pricing model that incorporated costs rather than LME prices due to the high cost of junk lead batteries (, Oct 29).

While junk battery prices have recently fallen from the historic highs seen through much of 2012, the representative was adamant that using a cost-plus contract still made sense going into 2013.

Junk batteries are currently trading in a range of 37 to 39 cents per pound, having traded at 43 to 45 cents per pound in October.

“Granted, the prices have eased, but even last week the battery prices went up slightly,” he said. “We’re having some cold weather up north but we haven’t had any in the whole southern part of the U.S., so the jury is still out as to what kind of battery season it’s going to be.”

“I feel it will be better than last winter, though it’s possible we could see the price of junks up to where they were last year,” he said. “If that is the case, smelters like us are better off to cover their downside. You can’t stand the losses we had last time.”

He said that their customers who signed the contracts had investigated the market and been given the same cost-plus pitch from other smelters. “They weren’t happy, but they didn’t have a lot of choice,” he said.

The company still has a couple of London Metal Exchange-based contracts with customers that were not up for renewal, the representative said.

Sources told AMM last week that the majority of new contracts signed for 2013 utilized a traditional “LME-plus” model, even though producers have pushed for cost-plus contracts since October (, Jan. 4).

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