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LONDON, Sept. 11 -- Lead fell the most in 11 months in London, with record trade volume, on a report Chinese production will exceed local demand this year. Copper and zinc declined.
&nbsp;&nbsp;&nbsp; China, the world's biggest lead producer and consumer, will have a 270,000 metric ton surplus, Reuters reported today, citing Feng Juncong, a senior analyst at state-backed researcher Beijing Antaike Information Development Co. China may export the metal on &quot;lackluster&quot; demand from domestic battery makers and higher overseas prices, Zhang Changhai, Antaike's chief lead analyst, told Bloomberg News in a phone interview yesterday.
&nbsp;&nbsp;&nbsp; &quot;Stories like this could cause some panic, as people want to protect profitable positions,&quot; Randy North, a trader at RBC Capital Markets in London, said today. &quot;There's a bunch of funds which had bought lead at considerably lower prices.&quot;
&nbsp;&nbsp;&nbsp; Lead for three-month delivery fell $289.50, or 12 percent, to $2,115.50 a ton on the London Metal Exchange by 5:18 p.m. local time. The contract declined as much as 12.7 percent, the largest intraday drop since Oct. 10. It touched $2,517.25, a 16- month high on Sept. 8 on speculation Chinese supply would shrink as authorities investigated cases of lead poisoning.
&nbsp;&nbsp;&nbsp; Trade volume of the benchmark three-month contract surged above 7,000 lots today, a record high, according to Calyon and RBC Capital Markets.
&nbsp;&nbsp;&nbsp; Copper for December delivery slid 5.75 cents, or 2 percent, to $2.8665 a pound on the New York Mercantile Exchange's Comex division. The metal for three-month delivery dropped 2 percent to $6,286 a ton on the LME.
&nbsp;&nbsp;&nbsp; 'Over-Extended' 
&nbsp;&nbsp;&nbsp; Lead and copper have more than doubled this year. The LME Index of the six metals traded on the exchange climbed for a seventh month in August.
&nbsp;&nbsp;&nbsp; Prices had become &quot;a little over- extended,&quot; Leon Westgate, an analyst at Standard Bank Plc in London, wrote in a report.
&nbsp;&nbsp;&nbsp; China produced about 3.2 million tons of lead in 2008, or about 37 percent of world output, according to the International Lead and Zinc Study Group. Traders and producers may ship lead abroad should a price gap persist for two weeks, Zhang said.
&nbsp;&nbsp;&nbsp; The metal, used mostly in batteries, jumped 24 percent in the two weeks ended Sept. 4 on concern about closings of Chinese smelters. The concern was &quot;grossly exaggerated,&quot; said Lars Steffensen, founder and managing director of Ebullio Capital Management LLP, which invests in industrial metals and other commodities.
&nbsp;&nbsp;&nbsp; &quot;Relative to fundamentals, the rally was a joke,&quot; he said yesterday by phone from Southend-on-Sea, England, where the firm is based. Prices may fall to around $1,700 to $1,800 a ton, Steffensen predicted.
&nbsp;&nbsp;&nbsp; Inventories Swell 
&nbsp;&nbsp;&nbsp; Lead stockpiles monitored by the LME rose 0.2 percent to 122,925 tons, the exchange said today in a daily report. That was the highest since Dec. 16, 2003. Canceled warrants, or metal earmarked for withdrawal from LME-registered warehouses, totaled 1,200 tons, or about 1 percent of inventories.
&nbsp;&nbsp;&nbsp; LME-monitored stocks of copper, used in electrical equipment and construction, rose for a 10th day, gaining 0.2 percent to 317,575 tons, the highest since May. Including those tracked by the New York and Shanghai exchanges, inventories were 452,541 tons, up 17 percent this year, according to data compiled by Bloomberg.
&nbsp;&nbsp;&nbsp; Among other LME metals for three-month delivery, zinc fell 3.5 percent to $1,910 a ton. China's output of the metal may be 4.2 million tons in 2009, compared with consumption of 3.93 million tons, Antaike's Feng told Bloomberg today, without giving a year-earlier comparison. China is also the world's largest consumer and producer of zinc, used to rust-proof steel.
&nbsp;&nbsp;&nbsp; Nickel, Tin 
&nbsp;&nbsp;&nbsp; Nickel lost $650, or 3.6 percent, to $17,300 a ton. Vale SA, the world's second-biggest producer of the metal, resumed output at its Thompson mine and refinery in Canada after a one-month halt for maintenance as ebbing demand caused world nickel prices to decline. Production at Vale's two other Canadian nickel mines remains halted because of a strike.
&nbsp;&nbsp;&nbsp; Tin declined $425, or 2.9 percent, to $14,275 a ton. The metal for September delivery traded at a premium of as much as $600 a ton to the three-month price, according to today's LME data, indicating a lack of tin available for delivery this month. The spread peaked at $622 a ton on Sept. 8, the highest since June 2004.
&nbsp;&nbsp;&nbsp; One unidentified firm held 50 percent to 79 percent of deliverable LME tin stockpiles as of Sept. 8, the exchange's warrant holding report shows.
&nbsp;&nbsp;&nbsp; Aluminum dropped 1.8 percent to $1,855 a ton.
&nbsp;&nbsp;&nbsp; (Source: Bloomberg)
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Lead Falls Most in 11 Months on China Surplus Report | Shanghai Non ferrous Metals

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