LME lead hits fresh record high

London Metal Exchange lead jumped 6% to hit a fresh record of $2,710 a metric ton Monday, driven by short-covering and momentum buying, with expectations for further price rises this week ahead of the third quarter-end, market participants said.

"There's been no fundamental news to trigger this push but I expect prices to continue higher through this week as investors position themselves ahead of the quarter-end," one London based broker said. The third quarter of fiscal year 2007 ends June 30.

The price rise is attributed to a combination of illiquid market conditions, concerns China will decrease exports because of concentrate unavailability, and supply-side issues including shipments from Ivernia's Magellan lead mine in Western Australia, which are halted until mid-August, analysts said.

Adding to price support are concerns of the impact a 10% Chinese export tax will have on supplies.

"The bulls are out in force for lead...reflecting market concerns that Chinese exports are about the dry up," said Kevin Norrish of Barclays Capital.

Unlike other metals such as nickel, worries over demand destruction hasn't been a major factor for lead.

The LME broker said a push towards $3,000/ton is "not impossible" with more strength expected overnight and into the week.

However, analysts also raised concerns lead prices have become "dangerous" at current record levels, with the possibility for a major correction once supplies resume from Magellan.

Lead's price strength also spilled over into nickel and the rest of the base metals complex, lifting copper and zinc from session lows.

Nickel jumped on the back of a major drawdown in LME inventories as well as technical-related buying, said Robin Bhar of UBS. LME data Monday showed a drawdown in nickel stocks by 480 tons to 8,550 tons. Other analysts added, however, that nickel prices are likely to remain skewed to the downside in light of weakening stainless steel activity in Europe and the U.S.

Three-month copper pushed off earlier session lows to trade near $7,400/ton, boosted by short-covering.

Concerns China might import less copper in coming months as it digests the large volumes imported in the first quarter is weighing on prices, but supply-side concerns continue to provide underlying price support leaving prices rangebound for the near-term.

A strike at Southern Copper Corp.'s Cuajone and Toquepala mines and its Ilo smelter and refinery in Peru continued Monday.

Meanwhile, Chile's Codelco said contingency plans are in place ahead of a potential strike by its contract workers. An ongoing strike at Xstrata PLC's Canadian Copper Refinery near Montreal, with an annual output of 370,000 tons, forced the company to declare force majeure last week.

And workers at Chile's Collahuasi are also likely to go on strike with a vote due June 28.

Prices in dollar a metric ton.

3 Months Metal Bid-Ask Change from

Friday PM kerb

Copper 7475.0-7480.0 Up 40

Lead 2710.0-2715.0 Up 170

Zinc 3525.0-3530.0 Dn 25

Aluminium 2720.0-2721.0 Up 23

Nickel 39050.0-39150.0 Up 1400

Tin 14075.0-14090.0 Up 275




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