Move over nickel, here comes lead (July 02, 2007)

METALS COMMENTARY

With lead prices steadily climbing toward record highs, the unglamorous metal looks poised to surpass nickel as the buzz metal on the investment circuit.

For the week of June 18-22, lead was up 9% to US$1.14 per lb., and has gained more than 50% since the beginning of the year. Lead prices gained another US2 in London on June 22.

Nickel prices mirrored lead’s movement — only in reverse. They fell roughly 9% for the week of June 18, closing in London at just US$16.69 per lb.

With lead’s strong run has come increased attention from speculative money, analysts say. That attention could keep lead prices climbing over the next few weeks.

More fundamentally, the metal’s price is being buoyed by low stockpiles at the London Metal Exchange. Inventories there fell 2,925 tonnes since June 11 to 42,350 tonnes.

The fall in inventories does not appear to be 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 more than 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 all lead leaving the country. China is the world’s biggest lead producer and the tax has fed into investor worry about the metal’s supply.

Also spurring on the metal’s gain is the closure of Ivernia’s Magellan mine in Australia.

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

Other lead producers include: Boliden, Breakwater Resources, ECU Silver Mining, First Majestic Silver, HMZ Metals, Hecla Mining, Lundin Mining, Pan American Silver, and Southern Copper.