ROI-High stocks, low price, but don't write lead off just yet: Andy Home

​Lead barely got a mention during this year's London Metal Exchange (LME) Week events, understandably so after ​prices spent months grinding sideways. The global market is on track to ‌notch ​up a fourth straight year of supply surplus, according to the International Lead and Zinc Study Group.

LME warehouses hold more lead than any other metal, and the LME three-month lead price has been the pack's consistent underperformer this year, down almost 6% since the start of January, at $1,900 per metric ton. But appearances ‌can be deceptive in this opaque market.

While copper and tin are riding the AI data center investment craze, lead is already deeply embedded in digital infrastructure through its use in backup batteries. Data centers account for around 8% of lead demand, according to Graeme Train, head of analysis at trade house Trafigura, speaking at the LME Seminar last week.

If that comes as a surprise, lead may have a few more surprises in store, particularly ‌for the funds that are running massive short positions on the LME contract. BEYOND THE STOCKS CHURN

The LME lead market has been characterised for months by large movements of metal between on-warrant and off-warrant storage ‌as stocks financiers play the warehouse arbitrage game. The single-day cancellation of 46,800 metric tons of LME-registered lead last week is a case in point.

This time it is US hedge fund Squarepoint that is moving metal out of warehouses operated by Trafigura-owned NKB in Singapore. Reuters reported that the lead will be re-delivered to warehouses operated by another warehouse operator in the same location. The incentive comes in the form of a rent-sharing deal with the new warehouse operator, in this case ISTIM.

The Singapore stocks carousel has been turning ⁠for months, which ​has diluted any price signal from the LME's daily inventory ⁠reports. But the churn masks an underlying downtrend.

Total LME inventory, both registered and sitting off-warrant, has fallen from 502,600 tons at the end of March to 407,000 tons. A significant amount of lead, it seems, has fallen off the warehousing carousel.

Singapore, where most of ⁠the LME stocks are located, is now exporting more lead than it receives. Exports rose to 47,000 tons in July, August and September from 28,000 tons in the prior three months, according to the World Bureau of Metal Statistics, which collects ​official customs figures.

Imports of refined lead, by contrast, were just 49,000 tons between March and September, down from 183,000 tons in the prior six months. CHINA RUNNING SHORT

The turnaround in Singapore's trade patterns ⁠coincides with a seismic shift in China's lead trade. The country is importing record amounts of lead. Inbound shipments of refined metal totalled 175,000 tons in the first nine months of this year, up from 24,000 tons in the same period of 2025.

The dominant supplier this year ⁠has ​been India, which was previously the prime source of the metal sitting in LME warehouses in Singapore. Chinese imports of antimonial lead more than tripled to 88,000 tons and those of lead bullion jumped by 82% to 136,000 tons over the same nine-month period.

Yet China's inventories of lead remain extremely low. Shanghai Futures Exchange warehouses hold just 26,802 tons, the lowest level since August 2024. Local data provider Shanghai Metals Market estimates ⁠what it terms "social" inventory across five key regions is also low at 25,600 tons.

Unlike the LME, the Shanghai contract is in backwardation, suggesting persistent tightness in the mainland market. Quite why China is so hungry for ⁠what is widely regarded as a legacy metal is ⁠a mystery.

Just maybe it could be something to do with this newfangled AI data center thing. (The opinions expressed here are those of Andy Home, a columnist for Reuters.)

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(Writing by Andy Home; Editing by Marguerita Choy)