Analysts expect strength in lead to continue after the metal posted robust gains on the London Metal Exchange Monday, a move exacerbated by illiquid market conditions, while tin prices retreated from record highs.
Low inventories and strong demand helped push LME lead to new highs Monday, a LME base metals analyst said. Moreover, follow-through buying provided underlying price support after last week's declaration of force majeure by French metals producer Metaleurop at one of its lead smelters in Germany, the analyst added.
Lead pushed to a record high of $1,775 a metric ton earlier Monday before retreating to $1,760/ton by the PM kerb. According to the LME, lead stocks fell 175 metric tons to 39,225 tons Monday.
Lead looks poised to head higher with no key resistance points in sight, the analyst noted.
Elsewhere on the LME, copper pushed higher amid U.S. dollar weakness, a base metals trader said, with light trading conditions exacerbating the gains. With no fresh news to prompt the move, the market is looking to Tuesday's Federal Open Market Committee's interest rate decision and comments for further dollar direction, the trader said, adding, however, that copper should remain within its recent range.
The market will continue to keep a close watch on ongoing labor contract renewals at Corporacion Nacional del Cobre de Chile's Norte division and at Xstrata's Altonorte smelter in Chile.
Altonorte union officials were to meet with Xstrata representatives Monday morning to continue negotiations but will strike Tuesday if no new offer is reached.
Unionized workers at Altonorte Saturday voted overwhelmingly in favor of walking off their posts if the company didn't sweeten its contract offer. The smelter employs 500 workers and produced 297,567 tons of copper anodes in 2005.
LME copper traded below the key psychological $7,000/ton price level and 25-day moving average of $6,999.48/ton. The metal fell from its session high of $6,980/ton to a PM kerb of $6,920/ton.
In currency moves, the euro strengthened against the dollar to surpass the $1.322 level. In the last few sessions, the dollar has made steps to stabilize against the euro after a sharp decline seen from mid to late November.
"A weaker dollar can make dollar denominated base metals cheaper to foreign investors, but a collapsing dollar could mean the value of the metal would depreciate relative to other currencies," Michael Davies of Sucden Research noted in a recent report.
Meanwhile, LME tin, which hit a fresh all-time high of $11,250/ton earlier Monday, retreated to a PM kerb of $11,050/ton.
The move higher was driven by ongoing supply concerns in Indonesia and strong demand. The smaller-liquidity metal market first moved higher in October, when the Indonesian government clamped down on independent smelters, citing a lack of proper licensing. This prompted a 21.5% price spike.
Indonesia is the world's largest tin producer at 120,000-130,000 tons a year out of a total global output of 350,000 tons.
Zinc prices traded modestly up to a session high of $4,375/ton before retreating to a PM kerb of $4,350/ton.
A drawdown in stock levels as well as concern over Zinifex's zinc concentrates supply is providing underlying support to prices, said the base metals trader. Zinc stocks fell by 500 tons to 86,650 tons, according to the LME.
A Zinifex company spokesman said Monday an unplanned shutdown at the company's Century mine in northeastern Australia may delay shipments of zinc and lead concentrates to its Asian customers.
A concentrator failure at Century, the world's biggest zinc mine, is expected to result in a seven-day shutdown, reducing Zinifex's sales this fiscal year by 8,300 tons of zinc and 700 tons of lead in concentrate, costing $30 million in revenues.
Prices in dollar a metric ton.
3 Months Metal Bid-Ask Change from
Friday PM kerb
Copper 6920.0-6930.0 Up 40
Lead 1760.0-1765.0 Up
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