Lead hits two-month peak over shortage concern

LONDON, May 22 (Reuters): Lead prices touched the highest in over two months on Tuesday on concern over potential shortages and as investors took short positions on the zinc/lead ratio.

Environmental inspections at secondary lead smelters in China have reduced supply in recent months, analysts said.

"Lead's a tight market, and it appears that traders are quite actively shorting the zinc/lead ratio, which has been overstretched for a long time," said Oliver Nugent, commodities strategist at ING Bank in Amsterdam.

The ratio of zinc to lead - which is often traded because the two metals are usually found in the same ore bodies - has slid to 1.25, the lowest since December, after touching 1.39 in April and March, the highest since 2007.

Nugent said he was wary of the rally due to heavy speculation in China.

"There's a lot of speculation in this Shanghai lead rally, a lot of froth coming in to chase this up. My worry is they don't stick around for long," he said.

Benchmark lead on the London Metal Exchange (LME) was up 1.5 per cent at $2,445 a tonne by 1030 GMT, the highest since March 14.

Lead on the Shanghai Futures Exchange jumped as much as 3.6 per cent to the highest since October at 20,465 yuan a tonne.