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LONDON: Tesla intends to replace the traditional lead-acid auxiliary batteries in its Model S and X electric vehicles with lithium-ion alternatives in a revamp of the two models.

Tesla Chief Executive Elon Musk dropped the teaser in an April interview on the automaker’s website, saying: “We should have done it before now, but it’s great that we’re doing it now.”

It might seem another nail in the coffin for a metal that has been the dominant battery material for more than a century yet has been tarnished by its toxic past.

But lead is far from dead.

London Metal Exchange (LME) lead last week hit a three-year high of $2,344 a tonne with time-spreads roiled by tightness since the middle of May. It is currently trading just below that at $2,325.

The rolling squeeze is partly technical but is founded on the post-lockdown resurgence of demand for lead-acid batteries as motorists return to the roads. Musk’s ambitions to engineer lead out of Tesla vehicles serves as a reminder that just about every vehicle on the road, whether electric or internal combustion engine, needs a lead-acid battery of some kind. The automotive supply chain may be stuttering because of the global microchip shortage, but the lead supply chain is finding it equally difficult to deliver to the right place at the right time.

The cash premium over the anchor LME three-month lead price

flexed out to $35 a tonne in late June and at Thursday’s close was still valued at a backwardation of $6.50.

It has been the most severe squeeze on cash metal since February 2020 and like previous periods of tightness seems to be the result of a position clash between some of the market’s bigger beasts.

But the all-important backdrop has been the steady decline in LME warehouse inventory over the past couple of months.

LME lead stocks have almost halved since the start of the year to 69,575 tonnes. Almost 30percent of that is metal awaiting physical load-out. The remaining open inventory of 49,050 tonnes is at its lowest level since July last year. LME lead stocks have a history of sudden arrivals, which makes it all the more noticeable that nothing has been delivered onto warrant since May despite the high cash premium. But there may not be much out there. LME off-warrant stocks - metal that is being stored off-market with the potential to be warranted - were at a low 3,600 tonnes at the end of April, according to the most recent exchange report.


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