(In MAY 20 story, corrects bullet point to show Q1 refined lead exports up 5 percent, deletes incorrect reference to 120 percent rise in text)
* Lead worst performing metal on LME this year
* China imposes new tax on lead-acid batteries
* Q1 refined lead exports from China up 5 pct
By Eric Onstad and Melanie Burton
LONDON/MELBOURNE, May 20 (Reuters) - Lead, the worst performing industrial metal on the London Metal Exchange this year, is set to stay under pressure due to weak demand in China, where a new tax has been slapped on lead-acid batteries and authorities are cracking down on electric-bikes.
Lead depends on lead-acid batteries for about 80 percent of demand in top consumer China.
The global lead market saw its surplus more than double in the first quarter to 29,000 tonnes from 13,000 tonnes in the same period last year, data showed this week.
“This year demand looks more worrying. And that’s the key reason we remain relatively bearish towards lead’s price outlook,” said analyst Wenyu Yao at consultancy Thomson Reuters GFMS.
Benchmark lead futures on the London Metal Exchange (LME) have shed 5 percent so far this year to around $1,700 a tonne compared with a 17-percent jump in prices of zinc, the best LME performer.
Yao said the lead-acid battery sector in China has been struggling due to heavy price competition and was further hit after the country imposed a tax of 4 percent in January on batteries, with cleaner types such as nickel-hydrogen and lithium-ion batteries exempt.
Also weighing on lead is a crackdown by Chinese municipal authorities on electric or e-bikes, which account for about one-third of Chinese demand for lead-acid batteries, amid some concerns about the bikes’ impact on road safety.
Guangzhou is proposing a ban on e-bikes while other large cities are hunting down e-bikes that fail to meet regulations, Yao told the Reuters Global Base Metals Forum.
“This year lead has been the ugly sister of the complex. This is a seasonally weak period for lead,” said Robin Bhar, head of metals research at Societe Generale in London.
The strongest period for lead is when battery makers stock up in the run-up to winter, when cold weather can cause failure of batteries, forcing people to buy replacements.
“Lead is not that bad fundamentally, however, I think it’s a relatively balanced market, so I don’t think the price will fall out of bed,” Bhar added.
SocGen expects the cash lead price to average $1,775 this year, but more bearish analysts in a Reuters poll last month forecast the price falling as low as $1,609.
On the supply side, the ramping up of an expanded lead smelter in South Korea may also pressure the market, according to analyst Vivienne Lloyd at Macquarie.
The Onsan smelter owned by Korea Zinc Inc is expanding capacity by 130,000 tonnes per year to 430,000 tonnes, making it the largest lead refinery in the world.
“Onsan is expanding its output, so that’s putting more material in the marketplace. Lead has potential for softening later in the year from Onsan material in the U.S.,” Lloyd said. (Reporting by Eric Onstad; Editing by Mark Potter)