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 Posted - 07/27/2007 : 19:33:01
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Lead Posts Largest Weekly Drop Since 1988; Nickel, Copper Fall
By Chanyaporn Chanjaroen and Brett Foley
July 27 (Bloomberg) -- Lead capped its biggest weekly drop since at least 1988 after traders judged that last week's record high no longer reflected the outlook for supply. Nickel and copper also declined.
Lead surged more than 15 percent last week after an explosion cut output at Doe Run Resources Corp.'s Herculaneum smelter on July 13. The smelter will resume full production next month and lost supply is likely to be small, said analysts including Stephen Briggs at Societe Generale in London.
``It got way, way too high, with little volume along the way,'' David Thurtell, an analyst at BNP Paribas in London, said by phone. That encouraged some ``big hedge funds'' who had bet on higher prices and producers of the metal to sell, he said. BNP Paribas is a member of the London Metal Exchange.
Lead for delivery in three months on the LME fell $110, or 3.6 percent, to $2,970 a metric ton. That's a 15 percent decline for the week, the steepest drop since at least 1988, when Bloomberg data began. The contract reached a record $3,500 on July 23. Lead has been the best performer on the LME this year.
Supply exceeded demand by 12,700 tons in May, a second consecutive monthly surplus, as smelters and recyclers expanded production to 717,000 tons, the Lisbon-based International Lead and Zinc Study Group said last week.
Inventories tracked by the LME fell 1.1 percent to 39,000 tons. They have fallen 63 percent in the past 12 months. Stocks are ``low'' and will limit the decline in prices, Thurtell said.
Nickel Stockpiles
Nickel declined for a fifth consecutive session, falling $750, or 2.4 percent, to $30,450 a ton. That's a weekly drop of 13 percent, the biggest since the week ended Oct. 15, 2004.
Inventories continue to rise. LME-tracked stockpiles jumped 600 tons, or 4.6 percent, to 13,686 tons, the highest since June 21, 2006. They have almost tripled in the past 12 months.
The metal, mostly used to make stainless steel, also fell as steelmakers said they are slowing purchases after prices reached a record $51,800 on May 9.
Stainless-steel mills in China, the world's largest user of nickel, are operating at about 80 percent of capacity, Zhang Shibao, a Shenzhen-based analyst at China Merchants Securities Co., said today. Shanxi Taigang Stainless Steel Co., China's largest producer, and other mills started cutting output this month to reduce a domestic supply glut.
Homes Slowdown
Copper dropped $15, or 0.2 percent, to $7,750 a ton, capping its first weekly drop since June 22. Stockpiles rose for a second consecutive day, up 2 percent to 102,800 tons, a three- week high. The metal fell 4.4 percent this week on signs of a worsening U.S. housing market. Builders are the biggest copper users.
Codelco, the world's biggest copper company, said today it idled its El Teniente and El Salvador mines after contract workers intensified a monthlong protest to demand higher pay.
The El Teniente mine, which produced 25 percent of Codelco's output last year, may be shut through July 29, Julio Jalil, leader of the mine's largest union, said today. The El Salvador mine, the company's smallest, has been idled almost every day since July 16 because of protests.
Copper has gained 22 percent this year in London, partly because of production disruptions in Chile and Canada.
Among other LME-traded metals, aluminum added $19 to $2,755 a ton, tin lost $125 to $15,375 a ton and zinc slipped $27 to $3,470 a ton.
To contact the reporters on this story: Brett Foley in London at bfoley8@bloomberg.net ; Chanyaporn Chanjaroen in London at cchanjroen@bloomberg.net .
Last Updated: July 27, 2007 15:23 EDT
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