Lead at new high, copper rebounds from low

Lead prices raced to a fresh record high on Monday on worries about supply from China, while copper rallied from a one-week low. Lead, used mainly in batteries, ended London Metal Exchange trade at a new peak of $2,710 per tonne, up $170 from Friday's closing quote and around 60 percent higher than its price at the start of the year.
Fundamentals of supply and demand are supportive, analysts said, but speculators in the financial markets have a taste for the metal, and this is driving the price.
"The bulls are out in force for lead, which has pushed prices higher and higher, arguably decoupling them from the week's developments (rising LME stocks, weaker Western World demand) and instead reflecting market concerns that Chinese exports are about to dry up," Barclays Capital said. Gains have been partly fuelled by the closure of the Magellan mine in Western Australia, owned by Canada's Ivernia.
Supply fears were reinforced last week by news that China exported less refined lead in May. Analysts think further gains could be triggered by output cuts in China because of rising prices of lead concentrate. They think about 600,000 tonnes of lead capacity in China is idle.
Prices of copper, often considered a gauge of the metals markets in particular and economic growth in general, slid to a one-week lows as jittery investors sold on worries about global slowdown, before rebounding to end the day at $7,480 per tonne, up $45 from Friday's close. It earlier traded down to $7,240, the lowest since June 14.
European shares pared losses towards the close of trade and ended well above session lows after stock markets were lifted by lower bond yields in the United States.
"Copper is one of the metals closely aligned with changes in equity market sentiment. (Base metals) are looking at the stock market for some reaffirmation that the global economy is going to be soft," J.P. Morgan analyst Michael Jansen said. "(The copper market) is suffering to some extent from high Chinese imports in February, March and April."
In New York, US copper futures erased morning losses to close slightly higher as traders covered short positions after the early declines failed to push prices through any significant technical levels, analysts said.
Copper for September delivery settled up 1.45 cents to $3.3980 a lb on the New York Mercantile Exchange's COMEX division, rebounding from a 1-1/2-week low at $3.2950 and trading as high as $3.4090. Record high Chinese imports earlier this year have raised fears of a glut of material finding its way out of China and into the export market, traders said.
"There doesn't seem to be any worry that strike action will actually take any metal out of the system," a LME trader said. Rising copper inventories in LME warehouses on Monday - up 1,200 tonnes to 119,025 tonnes - also weighed on prices. But analysts say stocks are still critically low and account for less than three days of global consumption.
But the general trend in stocks is still down. "With stocks continuing to fall to levels not seen since October of last year...copper is likely to find support at the current level while the risk of production delays looms," Deutsche Bank said in a research note.
Workers at two mines and a smelter in Peru owned by Southern Copper began a strike on Saturday for higher wages. At Chile's Collahuasi, one of the world's largest copper mines, workers will vote on a strike on June 27.
The whole industrial metals market, not just that in copper, would remain very sensitive to news about delays to planned mines and smelters. "There are a lot of new projects coming on line, and that's the biggest risk in either direction," said Thomas Benedix, analyst with $1.2 billion commodities fund Tiberius Asset Management.
"If they all come on line in the next one or two years we will have oversupplied markets even with Chinese demand growing, but then there is the ongoing risk of strikes or natural disasters, which could cause delays," he said.
In other copper industry news, Europe's largest copper producer Norddeutsche Affinerie said it did not expect any rival bidders would emerge to spoil its friendly bid for Belgian counterpart Cumerio.
Zinc played catch-up with Friday's base metals losses. It lost $20 to end the day at $3,530 a tonne while aluminium was at $2,721 from $2,697. Nickel was untraded but was quoted at $39,050/39,150 from $37,600 after speculative buying in late trading sessions pushed prices up, dealers said. Tin was up $225 at $14,075.