The cash price of lead closed at US$1.214/lb on the London Metal Exchange (LME) Tuesday, rising above aluminum's cash price - US$1.207/lb - for the first time in LME history.
Monday (Jun 25), aluminum prices closed at US$1.196/lb, while lead closed at US$1.179/lb cash.
"Not since the late 1970s when the LME aluminum contract was initiated have cash lead prices been as close to those of aluminum as they have this year," Barclays Capital said in a report, adding "bullish sentiment on lead has propelled prices by 54% since the beginning of the year."
LEAD PRICE SURGES
Over the past few decades, lead has been heavily substituted because of the negative health connotations associated with using it in applications such as paint, electronics, ammunition and lead piping.
"Consumption growth was much weaker for lead than for many other of the base metals," Barclays Capital analyst Gayle Berry told BNamericas.
"Whereas now much of that substitution has been worked through and there's very little room left for substitution in the key industry sectors that lead is used in, especially industrial and automotive batteries," Berry added.
Automotive and industrial batteries account for the vast majority of lead consumption.
"For lead it is a supply side story. Since the beginning of the year we've had supply disruptions and problems, both on the mining and refining sides of the market... That has led to the market tightening up even further," Berry said.
Short concentrate supply in turn has weighed on refined production growth.
ALUMINUM SUPPLY: CATCHING UP
Aluminum on the other hand has seen supply side improvements, with increased production in China and the West. Though demand for aluminum is still strong, supply is beginning to catch up and even exceed consumption, the Barclays analyst said.
"The aluminum market is much more balanced, it's in a less volatile environment. Whereas with lead when you have supply side shocks such as mine disruptions and refinery outages the prices react sharply," she explained.
Barclays has increased its short-term price targets for lead to US$2,800/t, while its aluminum short-term price target is US$2,680/t.
Berry commented: "Those numbers show you that in the short term we certainly expect lead to continue to be trading above aluminum."
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