Investors may be selling lead amid prospects for supply of the metal to exceed demand this year, according to Societe Generale SA.
The number of London Metal Exchange lead contracts outstanding, or open interest, reached the highest level since at least 2005 on April 10, while prices for three-month delivery were down 0.8 percent this year at that date. The combination suggests “investors have been selling lead,” analyst Robin Bhar said today at a Metal Bulletin conference in Warsaw.
Prices will probably average $2,280 a metric ton on the LME this year, according to Bhar. That compares with about $2,390 for the three-month contract in 2011 and about $2,397 for cash metal, data compiled by Bloomberg shows. Production will run ahead of usage by 250,000 tons this year, the analyst said.
“Investors and speculators now look to be playing lead from the short side,” Bhar said. Prices will be “buffeted by external factors” such as economic figures and exchange-rate movements, he said.
Lead for three-month delivery rose 0.8 percent to $2,094 a ton by 4:13 p.m. on the LME. The metal, used in batteries and radiation shielding, fell 20 percent last year amid concern about the strength of Chinese demand and the euro-area sovereign-debt crisis.
Prices will be “trapped in a range” of $2,000 to $2,400 a ton in the next few months before averaging $2,400 in the fourth quarter as demand improves, according to Bhar. That compares with an average of about $2,109 this year for three-month metal, according to data compiled by Bloomberg.
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