Lead for delivery in three months slid 2.2 percent to $1,878 a metric ton by 1:26 p.m. Wednesday on the London Metal Exchange. It reached the lowest price since August 2012. The metal, also used in radiation shielding, fell 15 percent this year and is the worst-performing metal on the LME.
Lead prices dropped to a 28-month low on concern that demand will ebb in China, the world’s largest consumer, while some industrial metals fell on concern that the Federal Reserve is moving closer to boosting interest rates.
“There is this perception among investors that demand prospects are not as good as they were,” Stephen Briggs, an analyst at BNP Paribas SA in London, said in a telephone interview.
Investors have been leaving lead this year, with open interest, or the number of futures outstanding, falling 15 percent to 143,682 contracts as of Dec. 15, LME data shows. A net-long position held by money managers as of last week was 4,231 contracts, compared with 30,519 contracts for copper. Trading in lead futures and options on the LME fell 12 percent last month from a year ago.
The preliminary Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics fell to a seven-month low of 49.5 in December from 50 the prior month. “If the market begins to feel as if the industrial growth isn’t going to continue in China, then you look around and wonder where it’s going to come from,” Tim Evans, the chief market strategist at Long Leaf Trading Group Inc. in Chicago, said in a telephone interview. China “has been at the center of global industrial growth.”
The dollar strengthened yesterday after U.S. Fed Chair Janet Yellen said rates would probably be gradually increased once economic targets were reached. Chinese new-home prices fell in November from the previous month in 67 out of 70 cities tracked by China’s statistics bureau, according to data released today.
The China data “is not good, generally speaking,” said Daniel Hynes, senior commodity strategist at Australia & New Zealand Banking Group Ltd. “Most of the optimism around expectations of stimulus measures coming from China has been diminished by the stronger U.S. dollar coming off the back of the Federal Reserve meeting.”
Yuguang, which has an annual capacity of 400,000 tonnes, will cut its production for about two months starting Thursday by as much as 20,000 tonnes, Li Xiaodong, the firm’s sales director, told Reuters in an interview.
“We are going to cut production immediately, by 15 to 30 percent. Current prices are too low and are far below production costs,” he said, adding that the firm has halted spot sales and will review its production plans again in mid-February.