LEAD PRICES RISE ON FINELY BALANCED PHYSICALS
Lead prices have risen this week against
a background of a finely balanced physical sector, traders
said.
    Further gains are possible if the USSR steps up its buying
or if labour problems develop in North America, they added.
    London Metal Exchange (LME) prices are unusually buoyant at
a time of year when seasonal demand is normally slackening and
prices tending to drift lower.
    This buoyancy is generally attributed by traders to the low
level of LME stocks and steady, if unspectacular, physical
demand in the Northern Hemisphere finding supplies curtailed.
    The supply problems are not new but are beginning to be
felt by a market in which, as peak winter demand tails off,
stocks usually build fast and availability increases, traders
said.
    The lower supply levels result from a number of different
factors around the globe.
    Delayed shipments from Peru to Mediterranean countries
because of production and transport problems, lack of Spanish
exports since the closure last year of Cia La Cruz's smelter at
Linares and lower output in Morocco and Greece have all meant
additional demand being directed to merchants who in turn have
been drawing on LME stocks.
    In addition Broken Hill Associated Smelters' Port Pirie,
South Australia, smelter is halting production for five weeks
for maintenance. Although the company said it would meet
commitments, this will put further pressure on stocks.
    And the U.S. Company Doe Run has kept its 140,000 tonnes
per year Boss, Montana smelter closed. This cut producer stocks
and contributed to a closer supply/demand balance within the
U.S. Market, for many years depressed by surplus production and
a regular supplier to the world market.
    Mexican supplies, which have sometimes swelled LME stocks,
have been normal but are finding ready buyers, traders said.
    On the demand side, winter battery manufacture has held up
quite well and some U.S. Buying of lead sheet has been reported
in the U.K. Soviet lead buying, notably absent in Europe in the
first two months of the year, was resumed when a large buying
order was filled by merchants in March.
    Merchant demand has fuelled the rise in LME lead prices
this week and has seen cash metal move above 320 stg and
establish a premium of around 10 stg over three months
delivery. Specific demand has been directed towards metal in
Gothenburg and Trieste warehouses. Gothenburg material is often
a target for merchants shipping to the USSR, traders said.
    On stocks, the popular LME Continental warehouses, Antwerp
and Rotterdam, have little more than 3,000 tonnes of lead each,
and this is believed to be in strong hands.
    Out of a total 22,125 tonnes in LME stocks, the lowest
level since June 1980, just over half is in U.K. Warehouses
which are not popular with merchants putting together
shipments.
    But even U.K. Stocks have dropped around 6,000 tonnes since
the start of the year. Traders said this is partly due to
secondary smelters buying ingots to supplement feed supplies
affected by environmental controls, which put restrictions on
the transport of used batteries.
    Labour negotiations in North America will play an important
part in determining the direction of prices, with contracts
expiring end-April at Cominco's Trail and Kimberley, B.C.,
Mine/smelter and at Doe Run's Herculaneum, Mo, smelter.
    Noranda's New Brunswick mine/smelter also has a contract
expiry in July which may cause some nervousness in view of
strikes by its zinc and copper workers over recent months.
    Traders said LME three months delivery, already attracting
speculative buying, could rise to 320/330 stg on current
firmness, while nearby tightness could widen the cash premium
to 20 from four. Three months was quoted at 313 stg at
midsession.
 Reuter
