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Rising Chinese supplies push lead to five-month lows

* GRAPHIC-2019 asset returns: * Zinc hits three-month low even as LME stocks at historical lows (Updates with closing prices) By Pratima Desai LONDON, Dec 3 (Reuters) – Lead prices hit five-month lows on Tuesday as funds and traders bet on weaker prices because of rising production of the auto battery metal in China and the potential for market surplus. Benchmark lead on the London Metal Exchange ended 0.3% down at $1,900 a tonne, having earlier dropped to $1,890, its lowest since July 9 and down more than 15% since Oct. 29. “The problem is rising secondary (recycled metal) supplies in China. You can see that in the price discount for secondary against primary supply,” said ING analyst Wenyu Yao. “Primary supplies in China are rising as well.” The discount for secondary lead climbed above 500 yuan ($71.03) in October but has since dropped back to 25 yuan. PORT PIRIE: Another factor weighing on lead prices are expectations that Nyrstar’s Port Pirie smelter in Australia, will soon restart production after halting output in May. Port Pirie produced 160,000 tonnes of lead last year. DEMAND: Lead demand is expected to shrink or remain unchanged this year for the first time since the 2008 financial crisis. Global lead demand is estimated at about 13 million tonnes this year. More than 85% of that will be used to make batteries, most destined for the auto industry. SURPLUS: Analysts at Citi expect the lead market to register a surplus of 25,000 tonnes this year and 106,000 tonnes in 2020. ZINC: Concerns over rising supply and weak demand from steel mills, mostly in China, sent zinc prices to a three-month low of $2,201. Zinc closed 1.8% down at $2,202. “The outlook for zinc is bearish, but on the LME market you need to be careful because stocks are at historical lows,” ING’s Yao said. Zinc stocks in LME-registered warehouses are below 60,000 tonnes, their lowest since the 1990s. ALUMINIUM: The premium for cash metal over the three-month contract has climbed to $22 a tonne, its highest since July 2018, having been at a discount for the first 10 months of 2019. The premium <MAL0-3> is expected to attract metal to LME warehouses, needed for delivery against long positions. Three-month aluminium fell 1.3% to $1,767. TRADE: U.S. President Donald Trump said that a trade agreement with China might have to wait until after the U.S. presidential election next November, denting hopes of a swift resolution and reinforcing pressure on base metals prices. PRICES: Copper was down 1.2% at $5,815, tin gained 1.6% to $16,750 and nickel ceded 2.5% to $13,375. (Reporting by Pratima Desai Editing by Jane Merriman and David Goodman)

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