Move over nickel, here comes lead (June 22, 2007)

With lead prices steadily climbing towards record highs, the un-glamorous metal looks poised to knock nickel off its long-held perch atop the basket of base metals.

Lead prices gained another 2 in London on June 22. For the week of June 18-22 it was up 9% to US$1.14, and it has gained over 50% since the beginning of the year.

Nickel prices mirrored leads movement in reverse, falling roughly 9% for the week and closing in London at just US$16.69 per lb.

With leads strong run has come increased attention from speculative money, analysts say, with expectations that the metal could continue to climb over the next few weeks.

Pushing up the metals price is the fact that stockpiles at the London Metal Exchange are low. Inventories there fell 2,925 tonnes since June 11 to 42, 350 tonnes.

And the fall in inventories is not a short term blip. In its most recent report the International Lead and Zinc Study Group said the global lead market was in deficit by 4,000 tonnes from January to April of this year.

LME stocks of lead have fallen over 10% since mid-May and the current amount only accounts for roughly two days of global consumption.

The key factors hitting global supply are seen to be a new tax structure in China and a closed mine in Australia.

The Chinese government recently slapped a 10% export tax on lead leaving the country. With China being the worlds biggest lead producer, the tax has fed into investor worry about the metals supply.

Also spurring on the metals price is the closure of Ivernias (IVW-T) Magellan mine in Australia.

Lead exports from the mine were stopped on March 11 of this year after health officials discovered birds were dying from lead poisoning in the port of Esperance. Roughly a month later the company said it had no choice but to shut down operations entirely. The company expects to resume operations in mid-August.

Boliden (BLS-T), Breakwater Resources (BWR-T), ECU Silver Mining (ECU-V), First Majestic Silver (FR-V), HMZ Metals (HMZ-T), Hecla Mining (HL-N), Lundin (LUN-T), Pan American Silver (PAA-T, PAAS-Q) and Southern Copper (PCU-N) are all producers of lead.