London Metal Exchange lead touched a new record high on Wednesday, lifted by low stockpiles, while nickel fell by over three percent following the previous session's heavy losses.
Nickel for three-months delivery bounced to $38,850 a tonne, up 3.3 percent, in early trade, before falling back $1,100 to close at $36,500. In the previous session, the key metal used in stainless steel closed at $37,600 after tumbling 7.2 percent as stainless steel producers are seen cutting back production.
Lead closed at a fresh record high of $2,511, up $111 or 4.6 percent, on fund buying. Traders said technical triggers accelerated the move higher.
"The ILZSG data yesterday showing the market's still in deficit again provided some evidence that fundamentally the lead market's tight," analyst Nick Moore at ABN Amro said. The global lead market was in deficit by 4,000 tonnes in January-April, the latest monthly bulletin from the International Lead and Zinc Study Group (ILZSG) showed.
"The LME inventories are a bit more than 40,000 tonnes and that is the trouble," Moore said. LME stocks of lead have fallen more than 10 percent since mid-May and currently stand at 43,175 tonnes, around two days of global consumption. Two-thirds of global nickel output is used in the production of stainless steel and Chinese producers have said they are considering cutting production.
"Nickel still looks vulnerable," an LME trader said. Nickel has shed almost $15,000 since early May, when it hit an all-time high of $51,800. "We continue to expect further downside risk to nickel prices on the back of easing fundamentals and believe that the correction in prices has further to run," a Barclays Capital report said.
Copper rose $80 to close at $7,510 a tonne, while copper for September delivery on the New York Mercantile Exchange's COMEX division settled up 4.15 cents to $3.4410 a lb.
Both markets were supported by festering strike threats. Mining shares like Vedanta, Lonmin and BHP Billiton were among the 10 biggest gainers on the London Stock Exchange, up over 1.3 percent on positive sentiment in the copper market.
"We are seeing a bit of technical bounce in metals, as markets push higher from relatively oversold conditions, while copper keeps an eye on a myriad of strikes that have, or are about to, get underway," MAN Financial said in a research note.
Workers at Chile's Collahuasi have set a strike vote for June 27 and at other Codelco operations sub-contractors plan to meet on Thursday to give the final go-ahead for a strike across Codelco's five divisions. In Peru workers at Southern Copper's two copper mines and a smelter plan to strike from June 23. Aluminium firmed $34 to $2,740, while zinc was flat at $3,610 and also tin closed $50 lower at $14,050/14,060.
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