Lead is a heavy metal with a relatively low melting point. It is soft, malleable, and yet, very dense. It is very useful in battery production, as well as in making protective shields in a radioactive environment. As a result, lead futures are quite popular in the commodity market.

The metal has been in use since the ancient Egyptian era, where it was used in pottery glazes, roofing, and making ornaments. It wasn’t until the late 19th century that it was used to store electrical energy.

Lead Futures Contract Specifications
Symbol
LED
Exchange
CME
Tick Size
$2.5
Contract Size
25 metric tons
Contract Months
All months
Trading Hours
Sun - Fri : 5:00 p.m - 4:00 p.m CT
Settlement
Deliverable
Last Trading Day
Trading ends on the third last business day of the contract month

 

Uses of Lead

Lead futures may not be among the most popular metal futures, but it is still widely traded because of the diverse uses of the commodity, which includes the following:

Battery production: Lead has desirable electrolytic properties which makes it an important component in making energy-storage batteries. Lead batteries are used to ignite internal combustion engines in cars and other vehicles. They are also useful in storing solar and wind energy for lighting homes and offices.

Radioactive shield: Lead is a highly dense element, so it is used to construct shields around radioactive materials, such as particle accelerators, nuclear reactors, and X-ray equipment.

Making ammunition: Being a dense and thick element, lead is often used for making bullets and other ammunition. Its physical properties make it the ideal metal in that regard.

Industrial parts: The physical properties of lead make it a reliable material for making industrial sheets and other materials used for dampening noise and vibrations in a factory setting.

The Largest Producers and Consumers of Lead

The global lead production is from both mining and recycling in almost equal proportion. Both sources yield about 10.7 million metric tons annually. China is, by far, the largest producer of lead in the world, accounting for about half of the total lead mine production. Other top producers include Australia, the United States, Peru, Mexico, Russia, India, Bolivia, Sweden, and Turkey.

According to the United States Geological Survey (USGS), the countries with the most lead reserve include Australia, China, Russia, Peru, and Mexico. The top consumers include China, the US, India, South Korea, Germany, Japan, Spain, Italy, the UK, and Brazil. Trading is done via the lead futures market.

Why Trade Lead Futures Contracts

Why Trade Lead Futures?

Why Trade Lead Futures?

Traders have different reasons for playing the lead futures market. Some are in the market for speculation, while some use the futures contracts to hedge against inflation or diversify their investment portfolios. The main stakeholders in the lead production-utilization chain come to the futures market to manage price risks.

Hedging against price fluctuation: The producers of the commodity may sell lead futures contracts to protect their businesses and secure a good price for the product, while those who make use of lead, such as battery producers, ammunition makers, and others, may buy the contracts to maintain a stable supply of the commodity.

Speculative trading: Aside from the key stakeholders, most of the traders in the lead futures market trade purely for speculative reasons. These speculators are interested in benefiting from the price fluctuations and not in the commodity itself.

Diversifying portfolio: Some fund managers and individual investors come to the lead futures market to diversify their portfolio. Commodities, like lead, offer investors opportunities to spread their risk across different asset classes so that when there is a bear market in one asset class, their portfolio won’t suffer a major hit.

Inflation hedge: Paper money loses value due to inflation, but commodities appreciate in value when inflation is rising. Thus, lead can be used to hedge against inflation. Some rich investors buy the commodity to protect their wealth from the effects of inflation.

How Lead Futures Trade

Lead futures contracts are offered on the London Metal Exchange (LME) and the Commodity Exchange Inc. (COMEX), which is a member of the Chicago Mercantile Exchange (CME) Group. Through the CME Globex electronic trading platform, the contract (LED) can be traded from any part of the world even after regular trading hours.

On the LME, one lead futures contract (PB) is equivalent to 25,000 tonnes of lead, and the price quotation is in U.S. dollars and cents per tonne. The contract can also be cleared in Japanese yen, British pounds, and the euro. The minimum price fluctuation is $0.50 per tonne for outright contracts or $0.10 per tonne for carries. The LME states the prompt dates are as follows:

  • Daily: out to 3 months
  • Weekly: 3 out to 6 months
  • Monthly: 7 out to 63 months

The CME listed monthly contracts for 12 consecutive months, and trading for any current delivery month terminates on the third-last business day of the contract month. At expiration, the contract is settled by physical delivery, and the lead delivered shall have a minimum purity of 99.97%. Traders, who don’t want to take or make delivery of the commodity, can roll over their contracts to the next expiration months.

All you need to start trading lead futures is to create an account with any of the exchanges through your futures broker and deposit the required margin. Lead futures contracts are leveraged instruments, so you need not have the full dollar worth of the contract to start.

However, you should be cautious about leveraged instruments — they can make you more money at a shorter time, but you can also lose heavily.

Lead Futures Trading Strategies

Those who succeed to find a trading strategy on the lead futures market will very likely find that it helps immensely with correlations to other markets and trading strategies. In general, this is a rule that’s applicable to most cases, in that the drawdown decreases as you extend to more markets and trading strategies.

If you want to get edges for a variety of different futures markets, we recommend that you take a closer look at our edge membership.

Factors that Affect Lead Futures

Several factors can affect the prices of lead futures contracts, and these are some of them:

Supply and Demand: The global lead stock levels, which are tracked by the LME, can affect lead prices. A drop in the global stocks signals supply shortage and causes price increase, while increasing stock levels may be a sign of an oversupply which causes a price decline. Similarly, changes in lead demand — 85 percent of which is for battery production — can affect lead prices.

Alternative technologies: Lithium-ion batteries are a better alternative to lead-acid batteries. Experts in the industry believe that Lithium-ion batteries may replace lead batteries in the future, but presently, they are still very expensive.

Health concerns: Studies show that chronic exposure to lead is harmful to humans. As a result, lead is being phased out of products like paints, gasoline, water-distribution pipes.

Conclusion

Lead is a soft, dense element with desirable electrolytic properties. It is mostly used in making batteries.  Lead futures contracts are traded on the LME and CME.

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