SHANGHAI, Jul 25 (SMM) – Record-low lead stocks across London Metal Exchange-approved warehouses are believed to the major driver of the recent lead rally.

After a pull-back at the start of this week, three-month LME lead resumed its rally that began on July 8, as falling LME lead inventories encouraged funds to continue to build bullish positions.

Bourse data showed that LME lead stocks extended their declines on Wednesday, losing 1,175 mt to 57,425 mt, new lows in about a decade.

Concerns about supply also added fuel to the lead rally, reflected by the smaller discount of cash lead against the three-month contract on the LME.

It was heard that Korea Zinc plans to begin two-month routine maintenance in August, which will impact lead output by some 10,000 mt. Unexpected production outage at Nyrstar’s Port Pirie smelter in June-July affected about 30,000 mt of lead output.

On the technical front, moving averages all flipped into an uptrend, triggering some buying.

Such robust performance helped LME lead to outperform its counterpart on the Shanghai Futures Exchange, who remained under pressure from poor fundamentals.

SMM data showed that lead social inventories across Shanghai, Guangdong, Zhejiang, Jiangsu and Tianjin rose to 39,500 mt as of Friday July 19.

This drove funds to exit Shanghai lead and pile into the London market, which also gave a boost to LME lead. An anticipated supply recovery overseas, however, is likely to eliminate the advantage of LME lead over its SHFE counterpart.

A traditional high consumption season in August-October and potential intensification of environmental probes in China ahead of the 70th anniversary of the founding of the country in October, meanwhile, will likely boost SHFE lead, helping it to outperform LME lead.