Battery makers feel pressure as lead prices rise

Rising prices of lead have become a concern for battery producers in India. Leading producers are considering raising prices of lead batteries, mainly used in automobiles. Lead is the primary raw material and its prices reached 16-month high after China had shut down its smelters.

Producers have some room to consider passing on the increased burden as the automobile sector is on a recovery path at present.

China is the world’s largest producer and consumer of lead. It shut down smelters with 240,000 tonnes of annual capacity in its top producing province of Henan after reports of lead poisoning in various areas. The prices were at a 16-month high at LME, quoting $2,387 a tonne, before falling to $2,295 a tonne. Lead price at LME was just $915 a tonne on December 5, 2008. This is almost a 150 per cent jump, which has put pressure on battery makers.

The weaker rupee has also made imported lead costlier. In domestic markets, lead tested its peak of Rs 114. In the coming months, lead inventories may fall. The prices are expected to see buying at lower levels as Chinese shutdown of smelters would remove the excess inventories, which would fill the gap of excess supply in the world.

Market leader and mostly present in the premium end of the product, Exide Batteries may pass on partial burden while south based Amar Raja batteries will have to think on coping with sharply rising prices.

T V Ramanathan, MD & CEO, Exide Batteries said that they reviewed their operations every month but they have been watching the situation whether to increase prices or to increase sale volumes.

He however said that “We are not much worried because all battery makers are facing the same situation. As a brand we command a premium. Exide has a market share of 70 per cent in the OEM segment. We have to see whether we are going to partly absorb the prices or partly increase them.”