Tight supplies lift lead from nine-month lows

LONDON — An increase in copper stockpiles on Monday pushed down prices of the metal used in power and construction, while lead continued to rise from nine-month lows on fears of tight supply.

LEAD: Benchmark lead on the London Metal Exchange (LME) closed 1.7% higher at $2,385 a ton. It has risen almost 7% since on May 2, touching $2,241, the lowest since August.

TECHNICALS: The metal broke above its 50- day moving average at $2,362. It faced Fibonacci resistance at $2,411, brokers Marex Spectron said.

PRICE OUTLOOK: Prices were likely to hit $2,640 in the third quarter, Hamilton said.

SUPPLY: Over 2014- 2016 global mined lead supply shrank by roughly 500,000 tons, or 10%. A Chinese crackdown since last year on industries that are heavy polluters squeezed output further.

This year, consultancy Wood Mackenzie forecast a market deficit of 115,000 tons in 2018 and 56,000 tons in 2019 after a 119,000 shortfall last year.

LEAD STOCKS: Headline stocks in LME-registered warehouses have fallen by a third since the start of last year to 131,225 tons.

LEAD TIME SPREAD: However a rise in the discount of cash lead over three-month metal to $13 a ton, the highest since November, suggests there is no immediate shortage of metal.

COPPER: LME copper shed 0.80% to finish at $6,885 a ton after headline stocks in LME warehouses rose 8,900 tons to 289,975 tons.

Inventories had fallen more than 100,000 tons since March to just over 280,000 tons, while copper prices have moved sideways after reaching a four-year high of $7,312.50 in December.

COPPER SCRAP: The effect of Chinese curbs on scrap metal imports introduced this year will be blunted by a rise in domestic scrap production, Wood Mackenzie consultants Yanting Zhou and Sifang Liu said.

“Total scrap supply in China will drop by around 100,000 tons in 2018, but will return to positive growth in 2019, to rise by approximately 70,000 tons,” they said in a note. Copper prices rose sharply last year when the restrictions were announced.

COPPER TECHNICALS: Copper may be forming a head and shoulder formation with a neckline at $6,532/$6,507, said Stéphanie Aymes, head of technical analysis at Societe Generale.

“A decisive break below would lead to a deeper correction towards $6,366/30 and $6,204/$6,168,” she said in a note.

OTHER METALS: Nickel shot up 3.2% to end at $14,500 a ton, aluminum rose 1.3% to close at $2,318.50 a ton, zinc lost 1% to $3,055 a ton and tin dipped 0.20% to $20,950 a ton. —