Lead ended at a new high on supply fears and copper rebounded on Friday, but analysts think the overall trend of rising copper stocks and lower demand over coming months could pressure prices down further. London Metal Exchange lead closed at a new record high of $2,220 a tonne, up 5.2 percent or $110.
The metal was boosted by data from the International Lead and Zinc Study Group, which showed a global deficit of 38,000 tonnes in the January-March period. Also, traders said lead exports from the Australian port of Esperance could see further delays as more soil testing could be required. Exports were suspended in March due to bird deaths, leaving 9,000 tonnes of lead for exports stranded at the port.
Copper for three-month delivery closed up 2.9 percent or $200 at $7,200 after touching an eight-week low of $6,952 in the previous session. That is a loss of more than 15 percent since the metal hit an 11-month high of $8,335 on May 4. The bounce in metal prices after Thursday's broader sell-off also pushed London-listed mining shares higher.
Rio Tinto, Vedanta and Anglo American gained over one percent and were found amongst the ten largest gainers on the FTSE 100 index. "The market was concerned there would be another thumping rise in Shanghai stocks and there wasn't, LME stock also fell," said Nick Moore, analyst at ABN Amro.
Stocks of copper monitored by the Shanghai Futures Exchange fell to 99,027 tonnes this week from 99,556 tonnes. LME warehouses saw stocks fall 1,975 tonnes on Friday to 134,125. But overall Shanghai inventories are up this year and that, coupled with strong Chinese imports, has led many analysts to conclude that demand from the world's top consumer could slow.
Canada's Ivernia shut down its Magellan lead mine and declared force majeure on shipments after exports from the port of Esperance were stopped on March 12 following the death of some 4,000 birds, possibly caused by lead poisoning.
"Lead is hitting fresh highs which always gives the momentum/system guys a bit of courage and the Esperance news wasn't exactly bearish," analyst David Thurtell at BNP Paribas said. Commodity Trading Advisors and black box traders might push the metal higher given the break of resistance at the old high of $2,216, he said.
The introduction of 10 percent tax on Chinese exports of unwrought refined lead from June 1 also supported prices as it could sharply cut supplies from the world's biggest producer.
Aluminium traded up at $2,792 from $2,755 on Thursday. The market is watching the large number of outstanding call option contracts - around 50,000, or more than one million tonnes - to buy aluminium at between $2,900 an $3,400 a tonne. Nickel gained 2.9 percent to $46,300/46,400 from $45,010 as speculators bought back short positions - bets on lower prices - ahead of the long holiday weekend in London. Tin closed at $13,900, up $100, and zinc ended at $3,640/3,650 up from $3,575 on Thursday.