BLBG: Lead Falls Most in Nine Months on Report About Chinese Surplus
By Chanyaporn Chanjaroen
Sept. 10 (Bloomberg) -- Lead fell the most in nine months in London on a report that Chinese production of the metal will exceed local demand this year. Copper and zinc dropped.
China, the world’s biggest lead producer and consumer, will have a 2.87 million-metric-ton surplus, Reuters reported today, citing Feng Juncong, a senior analyst at state-backed researcher Antaike in Beijing. China may export the metal because of “lackluster” domestic demand from battery makers and higher international prices, Zhang Changhai, Antaike’s chief lead analyst, told Bloomberg News in a phone interview yesterday.
The Reuters report “is quite a shooting in the hip in a big way,” Randy North, a trader at RBC Capital Markets in London, said today by phone. “There’s a bunch of funds which had bought lead at considerably lower prices. Stories like this could cause some panic, as people want to protect profitable positions.”
Lead for three-month delivery fell $235, or 9.8 percent, to $2,170 a ton on the London Metal Exchange at 1:47 p.m. local time. The contract lost as much as 11 percent, the largest intraday decline since Dec. 3. It touched $2,517.25, a 16-month high, on Sept. 8 on speculation about reduced Chinese supply as authorities investigate alleged cases of lead poisoning.
Copper for December delivery slid 5.75 cents, or 2 percent, to $2.8665 a pound on the New York Mercantile Exchange’s Comex division. The metal for three-month delivery dropped 2.2 percent to $6,275 a ton on the LME.
‘Over-Extended’
Lead and copper have more than doubled this year. The LME Index of the six metals traded on the exchange climbed for a seventh month in August. Prices had become “a little over- extended,” Leon Westgate, an analyst at Standard Bank Plc in London, wrote in a daily report.
China produced about 3.2 million tons of lead in 2008, or about 37 percent of world output, according to the International Lead and Zinc Study Group. Traders and producers may ship lead overseas should an existing price gap persist for two weeks, Zhang said.
The metal, used mostly in batteries, jumped 24 percent in the two weeks ended Sept. 4 on concern about closings of smelters in China. Speculation about shutdowns was “grossly exaggerated,” said Lars Steffensen, founder and managing director of Ebullio Capital Management LLP, which invests in industrial metals and other commodities.
“Relative to fundamentals, the rally was a joke,” he said yesterday by phone from Southend-on-Sea, England, where the firm is based. Prices may fall to around $1,700 to $1,800 a ton, Steffensen predicted.
Inventories Swell
Lead stockpiles monitored by the LME rose 0.2 percent to 122,925 tons, the exchange said today in a daily report. That was the highest since Dec. 16, 2003. Canceled warrants, or metal earmarked for withdrawal from LME-registered warehouses, totaled 1,200 tons, or about 1 percent of inventories.
LME-monitored stocks of copper, used in electrical equipment and construction, rose for a 10th day, gaining 0.2 percent to 317,575 tons, the highest since May. Including those tracked by the New York and Shanghai exchanges, inventories were 452,541 tons, up 17 percent this year, according to data compiled by Bloomberg.
Among other LME metals for three-month delivery, zinc fell 3 percent to $1,920 a ton. China’s output of the metal may be 4.2 million tons in 2009, compared with consumption of 3.93 million tons, Antaike’s Feng told Bloomberg today, without giving a year-earlier comparison. China is also the world’s largest consumer and producer of zinc, used to rust-proof steel.
Nickel, Tin
Nickel lost $400, or 2.2 percent, to $17,550 a ton. Vale SA, the world’s second-biggest producer of the metal, resumed output at its Thompson mine and refinery in Canada after a one- month halt for maintenance as ebbing demand caused world nickel prices to decline. Production at Vale’s two other Canadian nickel mines remains halted because of a strike.
Tin declined $350, or 2.4 percent, to $14,350 a ton. The metal for September delivery traded at a premium of as much as $600 a ton to the three-month price, according to today’s LME data, indicating a lack of tin available for delivery this month. The spread peaked at $622 a ton, the highest since June 2004, on Sept. 8.
One unnamed firm held between 50 percent and 79 percent of deliverable LME tin stockpiles as of Sept. 8, the exchange’s warrant holding report shows.
