Lead scales new peak on supply fears

Demand for batteries, closure of Aussie mine add to the metal shortage.

Lead hit a fresh all-time high and copper was up around 1 per cent on Monday as workers in Chile were ready to go on strike.

Lead increased $70, or 2.5 per cent, to $2,930 a tonne. Earlier, it advanced to a record $2,945.

The metal, used in car batteries, has been boosted by a shortage of concentrate, the raw material shipped to smelters, GFMS Metals Consulting's Buxton said.

UBS, in a report yesterday, raised its 2007 forecast for lead by 31 per cent to $1.02 a pound ($2,249 a tonne), citing supply concern.

Ivernia's suspension of exports from the Magellan mine since March 12 has reduced supply of concentrate. The Australian mine accounted for about 3 per cent of the global mined output.

The company shipped most of its production to China, also the world's largest lead consumer and producer. China imposed a 10 per cent tax on exports of refined lead from June 10.

That may constrain supply to international markets, UBS said. The second half of each year typically features increases in demand from car-battery producers, according to the bank.

Nickel dropped $250, or 0.7 per cent, to $35,050 a tonne. LME nickel inventories rose 5.5 per cent to 9,882 tonnes, the highest since July 3, 2006.

Among other LME-traded metals, aluminium climbed $8 to $2,820 and tin advanced $25 to $14,200. Zinc gained $20 to $3,465.

The combination of some cooling in world demand and improving supply should push metal prices modestly lower in 2007-2008.

"The market should record a 100,000-tonne surplus in 2007 and 200,000 tonne surplus in 2008, compared with deficits of around 200,000 tonnes in 2005 and 2006," said an analyst.

With the lead market still recovering from significant mine production losses, the industry is set to register a small shortfall of about 11,000 tonnes in 2007, JP Morgan said.

Canada's Ivernia, whose giant Magellan lead mine in Australia has been shut since April because of health concerns, said on Saturday it was seeking community comment on a proposal to ship lead concentrate from the port of Fremantle.

JP Morgan believed lead prices would peak in the next one to two months as the price had risen too far, up by over 70 per cent this year.