E-bikes pedal lead prices higher

Investors who put their money in lead, plain old lead -- not in more alluring commodities like gold or oil -- hit the jackpot last year thanks in part to to the e-bike explosion in China.

The rather dull and heavy base metal was the single strongest performing commodity in 2009, according to Scotiabank’s Commodity Price Index.

E-bike (electric bicycle) riders in China increased overall global battery demand and in turn made for astonishing lead demand from Canada, said Vice President of Scotia Economics Patricia Mohr.

Lead prices saw a 146% increase in the period from Dec 2008 to mid-December 2009, according to the bank’s index.

Gold didn’t even make the top five performing commodities, though investors clamored to it as a safe haven in uncertain market conditions. Gold came in tenth place on Scotia’s index with a 39% gain in prices. Crude came in fifth, with a 75% price rally.

Less glamorous base metals such as copper rounded out the top four led mainly by China’s growing industrial demand and economic turnaround.

“The market doesn’t always focus on quite the right thing,” Mohr said.

And as equity, lead can be difficult to isolate because it’s usually produced in association with zinc.

“So it’s not the easiest thing to play for an investor,” she said. But that doesn’t mean it can’t or shouldn’t be part of your portfolio.

Vancouver-based Teck Resources Ltd. for instance saw record revenues of $2.1 billion in its latest quarterly report.

Even mega miner Goldcorp wanted in on lead profits last year extracting lead and zinc concentrates for the first time in October from its new Penasquito mine in Mexico.

Lead will likely steal the spotlight again in 2010 as e-bikes quickly become one of the fastest growing forms of transportation in Asia. There are an estimated 120 million e-bikes in China, up from about 50,000 ten years ago.

The bikes typically hit maximum speeds of about 20 kilometres per hour and are powered by rechargeable batteries. The vast majority of e-bikes currently on the market are sold with Lead Acid (PbA) batteries though they can run on Nickel Metal Hydride, Nickel-cadmium and Lithium-ion or Lithium Polymer batteries.

Mohr expects lead to “hold at quite a high level” in 2010 driven by battery demand though the metal may not beat last year’s performance.

The economic downturn likely played a partial role in lead’s comeback as production from recycled materials derived from old batteries and secondary sources fell with overall weaker industrial output.

In addition to e-bikes, improving electric automobile technology and other rechargeable consumer goods means lead is going to be a market mainstay for many years to come.

“There’s a replacement market for batteries as well as an original equipment market,” Mohr said.