Lead set a fresh record high on Tuesday as the market fretted over supply tightness while copper rose to a five-month high on technical buying and strikes at mines. Lead for delivery in three months on the London Metal Exchange touched a new record of $3,522 a tonne and ended the session at $3,515, up $81 from Monday's close.
Ongoing supply tightness is affecting the market and news of a fire at an Xstrata facility has compounded that, analyst Robin Bhar at UBS said. Swiss-based miner Xstrata said a fire at its Mount Isa zinc-lead concentrator in Australia will impact about 15,000 to 20,000 tonnes of lead.
Stocks of lead, mainly used in the battery industry, stand at 22,325 tonnes - around one day's global consumption and down from 57,000 tonnes last year this period.
"We continue to be positive on lead market fundamentals, anticipating prices to set fresh all-time highs in light of the myriad supply problems facing the market, a tight concentrate market, declining Chinese lead exports and low LME lead inventories," Barclays Capital said in a research note. A 10 percent tax on Chinese lead exports has sharply curbed shipments out of the country.
In addition a new probe by an Australian State government into lead contamination at the key minerals export port of Esperance raised worries the port will stay shut for a long time.
European shares rose to a 10-week high but London-listed miners like Anglo American and Rio Tinto were down more than 2 percent. Copper prices rallied to a five-month high in reduced liquidity amid Chinese holidays. Shanghai will be closed all this week for National Day celebrations, India is closed for a public holiday and Hong Kong was shut on Monday.
"Copper is going through the roof, stops on copper were triggered once it broke through resistance at 8140-50, so it is purely technical buying" an LME trader said. Copper for delivery in three months rose to $8,280.25 a tonne, its highest since May 4 but later trimmed its losses and closed at $8,160 a tonne, up $70 from Monday.
The threat of significant supplies disruption lent support to metals prices, J.P. Morgan's Jansen said. Peruvian workers at Southern Copper, a major global copper producer, started an indefinite strike on Tuesday for higher wages. "The strike has materialised," Jorge Chavez, head of the Toquepala mine workers union, told Reuters.
Workers at the company's Ilo smelter and the Cuajone mine also joined the walkout, unions leaders said. Further unrest in Peru is looming as the country's biggest federation of mine worker unions said on Friday it has agreed to call a strike on November 5 after it claimed the government failed to amend labour rules in the sector.
The International Copper Study Group projected the world copper market to be in 110,000 tonnes surplus in 2007, rising to 250,000 in 2008, it said. Aluminium fell $40 to $2,488 while nickel rose $300 to $30,700. Technical analyst Daryl Guppy at Guppytraders.com said nickel was testing support at $30,000 after retreating from resistance at $34,900.
"The retreat and rebound pattern is typical of a trend breakout. A successful re-test of support at $30,000 confirms a higher probability of a trend change," he said. Zinc shed $40 to $3,060 and tin was at $15,650 up from Monday's $15,450/15,475.
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