Supply concerns sent lead to a record peak on the London Metal Exchange (LME) on Wednesday and tin hit a three-month high on fund buying, traders said. Lead for delivery in three months touched a record $3,260 a tonne before closing at $3,236 up $26 on Tuesday's close.
In early trade tin hit $14,970 the highest since its peak of $15,100 on April 18. It ended at $14,925, up 4.7 percent from the previous session's close at $14,250/14,300. Lead extended its gains from the previous session after news of an explosion at a US refinery last week encouraged more speculative buying in an already tight market.
The threat of a shortage of lead is the main driver of prices that have almost doubled since the start of the year. "Expected lower refined lead exports from China following a 10 percent tax and suspension of shipments from the Magellan mine in Australia have raised concerns of supply shortages," UBS strategist Robin Bhar said in a report.
China imposed a 10 percent export tax on refined lead on June 1 and on Wednesday, China said it would raise taxes on ores containing lead, zinc and copper from August 1.
"These fears were exacerbated after news of an explosion at the 200,000 tpy (tonnes per year) Herculaneum smelter in the US last Friday, the world's third largest," Bhar said. Privately-owned smelter firm Doe Run expected production at the plant to return to normal by next week.
Lead has gained over 90 percent this year as funds have piled into the contract and many of the Commodity Trading Advisors (CTA) have also been active buying tin, traders said. "CTA buying this morning broke the metal out of its earlier range at $14,200-14,300 and there is a lot of fund interest," an LME trader said.
Tin prices were seen higher, a Barclays Capital report said. "We believe that tin prices are not yet fully reflecting the supply shortfall facing the market this year," the report said.
The shortfall stems from a loss in Indonesian production, which accounts for one third of the world's tin output. In October 2006 the Indonesian government shut down a dozen independent smelters to stem illegal mining and production at Banka island, where the smleters are based, restarted in May.
"The medium-term outlook for tin demand is very positive, boosted by the increased use of lead-free solders in the electronics industry following EU regulations on the use of hazardous substances in electronics products," Barlays said.
LME copper was up $60 or 0.8 percent at $7,825. Threats to supply underpinned prices. In top producer Chile, the mining giant Codelco faced losses at its Andina division, operating at 80 percent of the normal output due to bad weather. At the Salvador division all operations were on hold because of a strike.
The market remained tight with cash metal trading at a premium of $110-120 above the three months price and stocks reversed two days of rises, falling 775 tonnes to 98,625 tonnes.
Diversified miner Rio Tinto said its refined copper output in the second quarter rose 20 percent year-on-year to 107,000 tonnes. Rio's shares eased 1.05 percent, in line with the FTSE share index down 1.38 percent. Other metals were little changed, with aluminium down $7 at $2,786, zinc shed $15 at $3,500. Nickel gained $760 at $32,750.
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