Lead Declines to Lowest in a Year as Stockpiles Grow 42 Percent

May 20 (Bloomberg) - Lead fell to the lowest in almost a year in London as a 42 percent increase in stockpiles in 2008 suggests supply will move into surplus this quarter, from a deficit previously. Aluminum and zinc also dropped.

Lead inventories monitored by the London Metal Exchange have swollen to 64,450 metric tons, the highest since Sept. 25, 2006. The market is moving into a surplus of 40,000 tons this quarter, from a shortfall in the first three months, according to Gayle Berry, an analyst at Barclays Capital in London.

The metal's decline was "a reaction to continued stock build in recent months," Berry said today by phone. Barclays is among 12 companies that trade on the LME floor.

Lead for delivery in three months lost as much as $96, or 4.3 percent, to $2,135 a ton, the lowest since May 25, 2007. It traded at $2,170 a ton as of 4:45 p.m. local time.

Lead, mainly used in car batteries, has lost 16 percent this year, the most among all LME-traded metals. Declining prices will dent sales at producers including Stockholm-based Boliden AB, whose shares have tumbled 10 percent this year.

Purchases in China, the largest user, have slowed this year as buyers wait for the government to release rules in June on the use of electric bicycles, Berry said. Such batteries account for about 20 percent of the nation's lead usage, Berry said.

Zinc slipped for a second day, falling 1 percent to $2,265 a ton on speculation lost production from last week's earthquake in China will be less than initially expected.

Quake Damage

Chinese output may drop by 60,000 tons this year because of smelter damage, Beijing Antaike Information Development Co. said today. The nation will produce 4.06 million tons in 2008, according to Antaike's estimate prior to the May 12 tremor.

"People are now able to assess the damage done by the Chinese earthquake," Thomas Benedix, an analyst at Tiberius Asset Management AG, said today by phone from Stuttgart, Germany. "The uncertainty premium has disappeared." Tiberius, a commodities money manager, has a total of $1.6 billion of funds under management.

The surplus of zinc, used to galvanize steel, will total 700,000 tons this year, according to London-based researcher CRU. LME-tracked zinc stockpiles have swollen 61 percent in the past year to 128,225 tons.

Aluminum lost $25, or 0.8 percent, to $2,970 a ton.

LME-monitored aluminum stockpiles expanded 22,175 tons, or 2.1 percent, to 1.06 million tons, the LME said today in a daily report. The figure is the highest since May 28, 2004. All of the increase took place in Mobile, Alabama. The U.S. is the world's second-largest aluminum producer after China.

Copper Prices

Copper added $5 to $8,320 a ton on the LME. The contract for July delivery increased 0.2 percent to $3.802 a pound on the Comex division of the New York Mercantile Exchange during after- hours electronic trade.

Stockpiles of copper monitored by the LME dropped 75 tons, or 0.1 percent, to 122,650 tons, according to exchange data. About 14 percent of the inventories are earmarked for withdrawal.

Santiago-based Codelco, the world's largest copper producer, yesterday said its new $1 billion Gabriel Mistral mine probably will produce 84,000 tons of refined metal this year, expanding to full annual capacity of 150,000 tons by 2009.

Contract workers at Codelco don't plan any more protests since they are getting bonus payments, Claudio Valenzuela, a spokesman for the Confederation of Copper Workers, said today by phone from the Chilean capital. The union organized a 20-day protest that started in April, which resulted in suspension at three Codelco mines.

Nickel dropped $100, or 0.4 percent, to $26,000 a ton. Tin fell $201, or 0.8 percent, to $23,799.