How to Trade in MCX Lead? – Factors Affecting Lead Price

By Advisorymandi
1-December-2018 8:09:11 AM
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Lead is one of the major components in battery production. It may not widely be used in industrial applications as much as aluminum and copper but the lead is one of the most liquid contracts on the MCX (Multi-Commodity Exchange). Metal Traders trade in MCX Lead through lead futures contracts. Here, we’re going to discuss how one can trade in MCX Lead in the commodity market. But, before we discuss the way of lead commodity trading, let’s take a look at the history of lead and what are the main uses of lead.

 

Overview: Lead Commodity

Despite being a soft, dense metal, the lead has been in use for thousands of years because it is easy to get it from the ground. The lead has a low melting point which made it easy to shape it as per the requirement. Lead is an industrial commodity which trades on the multi-commodity exchange (MCX) of India which is a state-of-the-art commodity futures exchange based in India.

Lead is a blue-grey metal which is anti-corrosive, malleable, and ductile in nature. It usually found in association with zinc, copper, and silver ores. Galena is the main lead ore. Lead is one of the most recyclable commodities which can be recycled infinitely without loss of its physical and chemical properties.

According to the stats, the recycled lead accounts for more than 60% of the total lead production. On top of that, it consumes very less energy as compared to the production of other industrial metals.

 

 

Primarily, it is used for manufacturing batteries especially the ones used in motorcycles, high power automobiles, electric cars, and bicycles. Apart from this lead-acid battery highly regarded for providing a vital backup emergency power supply during power failures in computer installations, telephone exchanges, aircraft control towers, and banks among others.

Overall, it is quite a precious metal for industrial applications which expected to increase in demand in next one or two decades.

 

How to Trade in MCX Lead?

You may not know but Lead is one of the most liquid contracts on the MCX (Multi Commodity Exchange) which piqued the interest of many traders. If you are a trader then you can trade in MCX Lead in futures market through Lead Futures and Lead Mini Futures contracts.

To get a better understanding of trading in MCX Lead, you can check out the MCX Lead Futures Contracts below:

 

 

Understanding the Lead Futures Contracts

In India, commodity traders can trade in MCX Lead through futures contracts in instruments: Lead & Lead Mini. Here, we are going to talk about the specifications of MCX Lead Futures Contracts which are available as per the Contract Launch Calendar. The trading unit of Lead in futures is 5 tons.  On futures exchanges, the price of Lead fluctuates in 5 paise (0.05 rupees) increments. This increment is known as “Tick” which is the smallest movement a futures contract can make. So, don’t forget when you start trading Lead, how many ticks the price moves away from the entry price determines your net profit or loss.

The Lead futures are among the 10 most liquid contracts on MCX at any point in time. It is because the contract is quoted exclusive of taxes, charges, and levies, the domestic price approximately reflects the global price converted into INR terms.

To initiate the trading in MCX Lead futures usually depends upon your commodity broker. And just like trading zinc in commodities or natural gas, in trading MCX Lead you need to close out your positions before the expiry of the contract.

 

Factors Affecting Lead Prices

There are several big factors impacting Lead prices which are as follows:

 

Supply & Demand

It is one of the biggest and most influencing factors which drive the price of Lead very much. In fact, the current MCX Lead traders have serious concern issues regarding the future demand of Lead. It is because due to lack of adequate mine production in India, the country mostly depends upon the imports for lead requirements.

If we take a look at the data of the World Bank during the fiscal year 2016-17, India’s refined Lead production was at 508,000 MT in 2016 which was at 496,000 MT in 2015. The reason country has to mostly depend upon the lead imports is that of lack of players in this segment: Binani Industries Ltd and Hindustan Zinc Ltd.

Take a look at below charts, you will see that India was the second biggest Lead Importer in the world on the other hand; the top lead exporters are Australia, Rep. of Korea, Canada, United Kingdom, and Germany etc.

 

 

In a global analysis, it was found that we must focus on the battery industry, which accounts for about 85% of Lead demand in near future. On top of that, the government data from both emerging and developed economics signs that demand energy is expected to double in the next 10-15 years.

To meet this demand, India and China have started investing in smart grid technology. Besides, the health issues which rose for lead-acid batteries in 2011 are now settled and production is on the upswing for new applications such as grid storage for renewable energy generation which could possibly fuel demand for lead-acid batteries. And if the demand continues to grow, the Lead prices could move higher.

So, we can say that “Supply & Demand” plays a major role in Lead futures. Besides, as societies develop, the demand for lead will automatically increase.

 

Economic Events

One who trades in MCX Lead use the economic calendar to get real-time updates on the major economic events such as National industrial growth, global financial crisis, inflation, recession, and crucial data related to the metal industry. This info helps them to avoid many mistakes and predict the future direction of the market. With the information at hands, they strategize their trade in favor of sudden fluctuation in lead prices.

There are other country-specific events such as the construction of a new production facility or process, discontinuance of old products, closures of mines or plants. All such geopolitical and economic events impact the prices of lead.

So, while trading in MCX lead don’t forget to keep one eye on all important updates on lead-related events and announcements.

 

Chinese Demand

One who trades in MCX metal is aware of the Chinese demand for industrial metals. China uses over 40 percent of the annual global supply of lead which makes its one of the biggest factor affecting the lead price. The Chinese growth in the last 2 decades pushed the commodities prices higher. Although there has been some slowdown in recent years, the Chinese demand for lead and other industrial metals will trigger the fluctuation in lead prices.

 

Government Policies

The trade policies set by the country’s government such as quotas, penalties, and suspension of taxes affect the supply of Lead. This could lead to the sudden movement in the prices of lead in the exchange. So, it would be wise to keep tabs on the latest actions taken by the government on trades.

 

Competitive Technologies

In this modern era, the technology sector has to improve a lot. With the rolling out of the Lithium-ion technology in batteries, the Lithium-Ion batteries practically replaced the Lead-Acid batteries as a power storage space. Any many industry experts start believing that lithium-Ion batteries could ultimately replace lead batteries in numerous automotive applications.

But, not to be worried! It is because of the major automotive applications such as usage in high power vehicles. So, keep updated on the competing technologies and other industrial commodities for potential threats.

 

Hope, this article helped you in a way you expected it to be. If you have any query or would like to add something then doesn’t forget to mention in the comment section below.

 

Note: All information & data provided in this article is for the educational purpose as well as to give general information on the finance & economy, not to provide any professional advice or service. Views & opinions are not biased against the company and do not affect any official policy or any other agency, an organization within the content.

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Author: Advisorymandi

AdvisoryMandi is India's most trusted Stock Market Advisory marketplace covers NSE, BSE, MCX & NCDEX. Invest with confidence and harness the power of AdvisoryMandi to make smarter investment decisions in Stocks, Indices, Commodities, Forex & IPO.

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