Lead at record high on demand from China

Lead rose to a record $3,000 a tonne in London as stockpiles shrank and demand increased from China, the largest consumer of the metal. Copper dropped for a second consecutive day.

Demand for the metal used in car batteries will exceed production by 74,000 tonnes this year, according to Macquarie Bank, forcing consumers to tap inventories. Stockpiles tracked by the London Metal Exchange (LME) fell 125 tonnes to 42,925 tonnes, the LME said today in a daily report. They have declined 61 per cent in the past 12 months.

The Chinese are "in the market'' to secure supply for battery production, Peter Hickson, an analyst at UBS AG in London, said in an interview. "The demand story for lead is looking very attractive.''

Lead for delivery in three months on the LME increased $55, or 1.9 per cent, to $2,990 a tonne.

Earlier, the metal traded at $3,000, beating the record set on July 9 by $35. Lead has soared 80 per cent this year, beating all other metals traded on the LME. Chinese production of the metal has been disrupted since the Toronto-based Ivernia halted exports of the ore from its Magellan mine in Australia in March. The mine previously accounted for about 3 per cent of the global lead output.

China's 10 per cent tax on exports of refined lead, introduced on June 1, has discouraged companies from selling in other countries. UBS, the world's biggest money manager, raised its 2007 average lead price forecast by 31 per cent on July 9, citing shrinking stockpiles, low mine supply and a seasonal demand pick up in the second half.

Still, record prices probably will encourage more production and exports from China, Walter de Wet, head of commodity research at Standard Bank, South Africa's largest bank, said by telephone from Johannesburg.

Copper dropped $47 to $7,860 on concerns that the recent price gains had probably reduced purchases from China, the largest user of the metal. Copper traded at a two-month high of $8,015 on July 9. China's imports rose 52 per cent in the first six months from a year ago, the Beijing-based customs office said yesterday.

"The Chinese have done enough buying in the first half to keep them going for a while,'' UBS's Hickson said. Stockpiles of copper tracked by the LME fell 1 per cent to 99,350 tonnes. They have declined 46 per cent this year.

Among other metals traded on the LME, aluminum dropped $7 to $2,801, nickel advanced $555 to $33,200 and tin increased $25 to $14,175. Zinc fell $9 to $3,395.