Copper prices rose on Wednesday as the dollar slipped on growing concern about further rate cuts in the United States, while lead hit a record high as the market fretted about a shortage. Generally higher base metals helped London-listed miners such as BHP Billiton, RIO Tinto, Xstrata and Kazakhmys, which all gained between 1 and 3 percent.
Copper for three-month delivery on the London Metal Exchange ended $140 higher at $8,190 a tonne. The metal used widely in the power and construction industries ended Tuesday at $8,050.
The US Federal Reserve cut benchmark interest rates by half a percentage point to 4.75 percent at its September meeting and investors are now starting to think another cut to stave off economic weakness could be on the cards. A lower US currency makes dollar-denominated metals cheaper for holders in other currencies.
"The dollar is driving copper and the complex higher," said David Thurtell, analyst at BNP Paribas. "I would have thought you might have seen some weakness after the strike at Southern Copper was called off."
An eight-day walkout at Southern Copper's operations in Peru was called off after the union and company officials signed a government-brokered accord. Overall, however, expectations are that copper will mostly trade within the $7,000 to $8,000 range. "The Chinese back-off when it goes over $8,000," a trader on the floor of the LME said. "When it gets to $7,000 they jump in and try to grab as much material as they can."
Lead hit a record high of $3,885 a tonne as speculators bet on strong demand and tight supply. Prices are up nearly 130 percent since January. "Lead prices are well supported by fundamentals, reflected in our forecast of a 101,000 tonnes supply shortfall this year," Calyon said in a note. The metal, used mainly to manufacture batteries, closed at $3,890/3,900 a tonne from $3,835 on Tuesday.
Production by Chinese smelters has fallen due to newly established export tax duties and lower fees, industry officials have said, and a series of problems at mines and smelters elsewhere in the world is putting pressure on limited stocks. LME lead inventories stand at 22,425 tonnes - only enough to feed consumer appetite for less than one day.
The International Lead and Zinc Study Group said earlier this week it expected the market in refined lead to be in deficit by 89,000 tonnes this year. Aluminium gained to $2,466 from $2,423 on Tuesday. Analysts expect prices to stay weak as Chinese smelters ramp up supplies over coming months. Steelmaking raw material nickel rose to $31,495/31,500 a tonne from $30,900, tin was at $15,975/16,000 from $15,840/15,850 and zinc closed up at $3,065 from $3,000.