Lead prices surged to the highest in a month on Thursday after production was halted at the Port Pirie smelter in Australia and inventories slid to the lowest in a decade, leading investors to buy back bearish positions.
Port Pirie, one of the world’s largest primary lead smelters, shut down on May 28 and declared force majeure, although output is expected to resume in the coming days, a spokesman told Reuters on Thursday.
“Across the complex, positioning has moved to the short side over the past month or so, so it remains vulnerable to positive news on the micro side, as we’ve seen in lead or zinc, or on the macro side,” said Deutsche Bank analyst Nicholas Snowdon.
“But we don’t see that as a signal that the over-arching softening trend in the market is being overturned. At the moment it’s a macro-driven setting for the base metals and it’s unlikely to change in the next few weeks.”
Benchmark lead prices on the London Metal Exchange advanced 1.3% to $1,890 a tonne in closing open outcry activity after touching $1,918.50, the highest since May 1.
* LEAD STOCKS: LME lead inventories MPBSTX-TOTAL have fallen to 66,550 tonnes, the lowest since April 2009, LME data showed on Thursday.
* LEAD SPREADS: The premium of LME cash lead to the three-month contract CMPB0-3 jumped to $39 a tonne by Wednesday’s close, the strongest since January 2017 and up from $2.50 the day before, indicating immediate shortages of supply. It pulled back slightly to $32.50 on Thursday.
Exacerbating the tight situation was a large position accounting for 40-50% of available inventories, according to LME data. <0#LME-WHL>
* DOLLAR: Also supporting metals was a weaker dollar index , which makes commodities priced in the greenback cheaper for buyers using other currencies.
* ZINC STOCKS: LME zinc finished 1.7% higher at $2,502.50 a tonne, partly due to a sharp fall in on-warrant LME inventories.
“We’ve seen a jump of about 30,000 tonnes in cancellations, which take cancellations as a proportion of total stocks to 40%,” Snowdon said. “That’s been an important short-term reversal in LME stock trends.”
* COPPER: LME three-month copper ended virtually unchanged, up 0.01% or $1 to $5,808 a tonne, recovering from a five-month low hit on Wednesday. The contract has lost around 9% since the beginning of May when the U.S.-China trade talks faltered.
“The size of the short on Comex coupled with momentum indicators potentially looking oversold and key tech levels makes it tough to espouse shorting the market at current levels,” said Alastair Munro at broker Marex Spectron.
* PRICES: LME aluminium added 0.3% to end at $1,776 a tonne, nickel slipped 0.4% to $11,675, while tin rose 0.4% to $19,250. Both aluminium and nickel earlier touched their lowest since January.