Lead prices fall as supply problems seen easing
|
|
|
London Metal Exchange lead prices fell 15 per cent this week on expectations that supply disruptions through the Western Australia port of Esperance look set to ease, traders and analysts say.
The price fell to $2600/tonne on last Thursday after flirting with $4000/tonne just two months ago. Even though events in China could put a breeze behind the metal looking forward, for now the market is nervous about Western Australia’s Magellan mine picking up exports of concentrate, said Base Metals.com analyst Mr. Will Adams.
Canada-based Ivernia Inc (IVW.T), which owns the Magellan mine, says it expects to ship around 8,000 tonnes metric tons of concentrate in March-April next year, currently stranded at Esperance because of environmental issues. Australia’s Department of the Environment and Conservation suspended Esperance’s lead export licence on March 12 after thousand of birds died due to lead dust poisoning in and around the port.
SELLING SPARKED
Speculation that the supply hold-ups could soon be resolved sparked selling by US-based hedge funds, which pressured prices below key support at $2,800/tonne. Heavy liquidation was seen on the London bourse as further long positions were cut. Also, within the market there is speculation that one or more large books have been closed out.
Supply problems from Magellan have been a key driver in the record run for lead prices on the LME, which peaked at $3,890/tonne in October from $1,700/tonne at the start of the year.
BATTERY DEMAND
Supply issues aren’t the only factor dampening lead’s tight fundamentals. Battery demand, which accounts for 80 per cent of the total, also looks set to soften as winter approaches.
Weather forecasts point to a mild US winter which would be bearish for lead, with demand in the US for replacement lead-acid automobile batteries already soft, said Morgan Stanley in a recent note.
Extremities of weather put stress on batteries, making the height of summer and winter the peak seasons for battery replacement demand.
In October, US lead-acid replacement battery sales fell 2.5 per cent, according to Battery Council International.
But while demand in European countries for batteries has been on the decline, demand for lead in battery-powered Chinese bicycles has soared, said Barclays Capital analyst Mr. Gail Berry.
CHINA DEMAND
China accounts for 33-34 per cent of global lead demand but equates to about 170 per cent of demand growth, said Mr. Berry, and with reports that China’s tighter fiscal policy has some smaller operations struggling to fund credit lines, most analysts are waiting until calendar year 2008 for demand to regain traction.
This week the Chinese government signaled plans to tighten monetary policy in 2008, with stricter policies on credit and higher interest rates to put the brakes on inflation.
|
|
|
|
Source : Business Line |
|
|
|
|
|
RecycleINme.com. All Rights Reserved
