LONDON (Commodity Online): LME prices were broadly lower across the complex on Tuesday, as concerns over the Euro debt crisis were driven higher by a broad sell-off across the region’s bond markets. Aluminium and Lead were the hardest hit, down by just over 2%. Overall prices are flat on Wednesday morning with the exception of Copper which is trading lower again this morning.

The International Nickel Study Group released its monthly data on Tuesday. This showed that for September the refined nickel market was in a 6.5Kt surplus, as refined production (+7% y/y, 137Kt) outpaced consumption growth (+4% y/y, 130Kt). Refined production growth continues, however, to be vastly outpaced by strong mine production growth which rose to 172.4Kt for the month, up close to 25% y/y.

For the year-to-date, the INSG had the refined market in a 6Kt deficit, although this should be divided into a 24Kt deficit in H1 versus 18Kt surplus in Q3. In terms of the demand data, of interest was the fact that European refined nickel demand was flat y/y in September (+3.2% y/y ytd) versus a weaker picture in the US, where refined demand fell 8% y/y (+2.2% y/y ytd). This certainly contrasts with the relative macroeconomic performance seen in the respective regions.

On the supply side of the lead market, Ivernia's Q3 results stated that it could not provide any specific guidance on when the company will restart operations at the Magellan Mine. Magellan is the largest leadonly mine in the world with the potential production capacity of nearly 90Kt of Lead a year.

The operation has, however, been closed since April this year following the detection of a small amount of lead bearing mud on the outside of one of its shipping containers at the Port of Fremantle. The company’s statement on Tuesday essentially dimmed expectations of any sort of ramp-up at the facility until at least H2 12.

First, it needs to wait for government final operating conditions and these are reviewed. Second, after any subsequent decision to restart there will then be a period needed to comply with operating conditions before actual commencement of operations. Third, following a decision to restart and prior to commencing a restart of operations at the mine, the company would need to undergo a significant recruiting and training effort.

 Finally, the company expects that it would take more than six months of operation before the mine and processing plant are operating at full production levels. In summary, there appears no reason to believe that, given all these potential hurdles, that the market should anticipate Magellan mine being back on line at peak capacity by H2 12 at the very earliest.

More positive news on the supply side came from Peru, where the miners union stated that it was close to a wage deal on Tuesday at Volcans Yauli Zinc operations. A small number of workers downed tools at the operations in the region on Tuesday but there was no reported impact on output at the Mahr Tunel (40Kt expected output in 2011), Andaychagua (42Kt expected output in 2011) and Carahuacra (73Kt expected output in 2011) facilities.

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