Lead was at the front of an advance in a solid day's trading at the London Metal Exchange on Wednesday, dealers said. While most three-months contracts rose around 2 percent, lead was up 4.7 percent to a peak for the day of $1,345 per tonne, its highest since February.
Traders said buyers were picking up contracts across the board, and the new wave of speculative money that fund managers talked about on Tuesday was still coming into base metals. "It's the whole complex," a ring dealer said. "The reason behind it is there's buying in the Far East, there's fund buying and there's technical buying."
Lead closed kerb trading at $1,340 per tonne, up $55 on Tuesday's kerb. Copper ended the kerb up 1.5 percent at $8,040.
"The strength in copper prices is reflective of tightening copper market fundamentals as we approach the end of the seasonal low activity summer period," Barclays Capital said in a note. "We believe that markets are underestimating the combined impact on copper supply of recent production losses and also expect a significant upturn in Chinese buying of copper to emerge before too long."
Wednesday was option declarations day, with re-positioning in early trade, and the solid performance in the previous session prompted the market to pause.
That the rally happened on the back of high volume and with plenty of money coming from funds was encouraging, BaseMetals.com analyst William Adams said in a note. "There is room on the upside in the short to medium term."
The impact on supply from the recently ended strike at the world's largest copper mine, Chile's Escondida, contributed to the view that a shortage was looming, traders said.
Escondida, majority-owned by BHP Billiton, lost close to 3,500 tonnes per day in production at the mine during a 25-day strike. LME copper stocks came in unchanged at 128,275 tonnes on Wednesday, less than three days of global consumption. Zinc ended the day at $3,715 against $3,615 on Tuesday, when the metal rose by over four percent.
Mid-year saw a sell-off of long zinc positions bought in anticipation of a price rise, analyst John Reade at UBS said in a note. As the market had recovered since mid-June, Reade expected speculative longs to come back, believing prices would rise on the return of physical buying in the seasonally strong fourth quarter amid low stocks and tight supply.
LME inventories fell to 167,825 tonnes, down by 550, their lowest since 1992. Aluminium was 2.4 percent higher at $2,635 against $2,573, and nickel was indicated at up at $28,400/28,500 versus $27,900. Stocks of nickel in LME-monitored warehouses rose to 6,360 tonnes, up 474. Reflecting that, the premium for cash settlement versus three-month delivery metal eased to $1,400 from $5,250 two weeks ago. Tin traded higher at $9,175 versus $9,070/9,090.
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