Copper up as LME inventories fall; lead hits new contract high

LONDON - Copper rose as metals markets continued to recover from last week's sell off and as LME inventories declined further, while lead hit a new contract high on news that China plans to tax lead exports.

The LME said, in a daily report earlier, copper inventories held in its warehouses declined for a third day running, this time by 1,650 tonnes to total 138,425 tonnes. LME inventories have now fallen from around 200,000 tonnes at the start of the year to under 140,000 tonnes. Total stocks are now at their lowest levels since November last year.

The falls in LME inventories have helped offset fears of an oversupply of stocks in Shanghai, where weekly data out last Friday showed inventories rose to their highest since early 2004.

That data helped push copper down 8 pct on the week as it added to worries that the high level of Chinese imports in the year to date -- which have led to the stock gains in Shanghai -- are set to slow going forward.

At 10.19 am, LME copper for 3-month delivery was trading up at 7,505 usd a tonne against 7,273 usd at the close yesterday. On Friday, copper touched an intra-day low of 7,090 usd -- its lowest since April 3.

Alex Heath, head of base metals at RBC Capital Markets said he believes last week's sell off was exaggerated and was in fact not based on worries over fundamental supply demand data out from China.

"It may appear that the bearish knee-jerk reactions seen last week were false, and were blamed on fundamentals and economics by analysts, just to fit the trades being initiated by technical players," he said.

He added that a couple of reports released recently have made mention of higher price forecasts by industry players who continue to expect, as he does, strong demand from China going forward.

Elsewhere, lead was up at 2,200 usd a tonne against 2,110 usd at the close yesterday - having earlier touched 2,216 usd a tonne, the highest ever level for the current LME lead contract.

Meanwhile zinc was up at 3,810 usd against 3,800 usd.

The Chinese government has moved to impose or increase taxes on a range of metal exports in an effort to control exports by energy-intensive industries and ease its huge trade surplus.

According to RBC's Heath, authorities plan to raise the tax on unwrought zinc exports to 10 pct from 5 pct, while adding a 10 pct tax onto exports of refined lead.

"The statement did not mention aluminium products, which currently enjoy a rebate of 8 to 11 pct, but many traders expect that to be removed sometime this year," he said.

Aluminium was up at 2,887 usd against 2,870 usd, continuing to trade in a narrow range seen over the past week of not more than 30 usd a tonne.

According to data out yesterday from the International Aluminium Institute, global aluminium production in April was 12 pct above the level of a year earlier.

Elsewhere, nickel fell to 50,300 usd a tonne against 50,450 usd, while tin was up at 14,175 usd against 14,125 tonnes.