low inventories to support metals prices

Low Inventories to Support Metals Prices, Lehman's Widmer Says

By Glenys Sim

June 17 (Bloomberg) -- Metal inventories are set to remain well below historical averages this year following relatively healthy demand and insufficient supply additions, which should support prices, according to Lehman Brothers Holdings Inc.

The long-term average for reported copper inventories is 3.01 weeks of demand, and is expected to reach 1.25 weeks at year end, Michael Widmer, the bank's director of metals research, said. Stockpiles of copper at London Metal Exchange warehouses stood at 122,050 metric tons yesterday, equivalent to about 1.3 weeks of demand, Widmer wrote in a report released today.

``Even though the general macroeconomic backdrop may not be very strong, it is worth noting that China's industrial production expanded by 16 percent in May,'' Widmer said. ``In addition, the supply side remains problematic, which is reflected in sharply higher lead times for key mining equipment.''

The historical average of aluminum inventories is 5.43 weeks of demand, and may reach 3.34 weeks by the end of the year. At 1,068,650 tons, aluminum stockpiles are currently around 3.92 weeks of demand, Widmer said.

Zinc and lead inventories are expected to be around 3.07 weeks and 1.25 weeks of demand at the end of the year, down from their long-term averages of 6.2 weeks and 3.82 weeks respectively, according to the report.

The long-term average for nickel inventories is 9.32 weeks of demand. They are now equivalent to 7.53 weeks of demand, and are expected to rise to 7.74 weeks by the end of the year, said Widmer.

To contact the reporter for this story: Glenys Sim in Singapore at [email protected]