Lead prices hit 6-1/2 year highs on Friday on worries about shortages after key Chinese mines shut for the winter. Lead pared gains and other industrial metals sunk into the red under pressure from a rebound in the dollar following strong US jobs data. Benchmark lead on the London Metal Exchange hit a peak of $2,685 per tonne, the strongest since July 29, 2011, before closing 0.6 percent firmer at $2,680.
"It's the time of year when Chinese mining of zinc and lead comes under a lot of pressure when Inner Mongolia shuts down for winter," said Colin Hamilton, director of commodities research at BMO Capital Markets. "It's clearly tightened up the concentrate side of the market and that's feeding through into LME pricing."
Shortages of lead concentrate in China have become so severe that treatment charges - the fees that smelters charge to turn ore into metal - have skidded to zero or negative levels in some cases, he added. Metals were pressured by a bounce in the dollar index, lifted by data showing the strongest US annual wage growth since 2009, raising the prospect of accelerating inflation and more US interest rate hikes than expected this year.
A stronger dollar makes commodities priced in the greenback more expensive for buyers using other currencies. The gap between sister metals zinc and lead were expected to continue to narrow with lead seen extending gains on shortages and zinc pulling back slightly since it had already had a strong rise, Hamilton said.
The premium of zinc over lead hit the highest in over a decade at $948 a tonne on Monday and has since retreated to $835. The premium of cash lead over three-month lead rose to $22 a tonne, the highest in over a month, indicating a shortage of material for immediate delivery.
Three-month LME copper shed 1 percent to finish at $7,045 a tonne, retreating from the highest in a week at $7,188.50. Copper has the smallest speculative long position of the LME complex at 4.3 percent of open interest, according to Alastair Munro at broker Marex Spectron.
LME tin bucked the weaker trend and added 0.6 percent to finish the day at $21,530 a tonne after LME on-warrant inventories - those not earmarked for delivery and therefore available to investors - slid 16 percent to 1,155 tonnes, very close to the record low of 1,125 tonnes seen in November 2016. LME aluminium fell 0.7 percent to close at $2,210 a tonne, zinc declined 1.6 percent to $3,502 and nickel slid 4.1 percent $13,430.
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