Trade Lead short term with a caution

Lead prices gained this month as production of China, which is the world's largest lead producer, fell by 6.3% in September to 364,800 tonnes, the lowest since May.

It got a big injection in the arm because of the smelter clampdown due to pollution restrictions in China. Global lead mine production will increase by 1.3 per cent to 3.94 Mt in 2009.

By the next year, output is forecast to increase by 5.8 per cent to 4.17Mt following further expansion expected in China's output. Global refined lead metal production is forecast to increase by 3.4 per cent to 8.99 Mt in 2009 with a 20 per cent increase in China. In 2010, new plants to be commissioned in Brazil and India with higher production elsewhere will increase output by 7.4 per cent.

Asia will add 30% of the new mine production capacity up to 2016, with Russia providing the lion's share of more than 90,000t/year, while India and China will account for 58,000t/year and 37,000t/year, respectively.

Secondary lead supply growth will average 3% from 2010-2016, to yield 5.9 Mt in 2016. Mine production by 2016 will be almost 4.75 Mt. Lead failed to register the same exuberance as zinc with the market unable to trade past the September highs.

Technically, relative lack of strength versus other base metals like copper and zinc means that the market should be devoid of much excitement for November, particularly on the way up.

Short term traders can look towards buying at support levels but any longs should be traded with caution and a keen eye should be kept on the sentiment prevalent in other base metals during the same time.

Courtesy: Religare Commodities

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