London (Platts)--19Dec2012/809 am EST/1309 GMT

European lead and zinc premiums were unchanged this week as prices on the London Metal Exchange remained elevated with lead prices touching a year high, market participants said.

Three-months lead hit a year-high of $2,347.75/mt in morning trade on LMEselect Wednesday, however, some market players were hesitant to put the move higher purely down to improved fundamentals.

"To be honest it's mostly the dollar movement, although lead, copper and tin look better fundamentally," one European trader said.

The euro climbed to trade above $1.32 against the dollar Wednesday morning, continuing to build on recent gains as the US fiscal debate remained in focus.

One producer source, who deals in lead, tin and copper, said that contract negotiations for lead and tin are going well for 2013 "at similar levels" to 2012, although copper was proving more tricky.

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"The fundamentals for lead look good, compared to the rest of the metals, like tin," the producer said.

However, a second trader said that the fundamental picture for lead was not as bullish as it had been at the beginning of the year.

"Looking at the physical market, the pressure has eased. There's enough lead out there now," he said.

The second trader said that lead stocks on the LME were over 300,000 mt and although it was difficult to get hold of material due to long queues, material was still physically there.

Global LME warehouse stocks of lead stood at 335,750 mt Wednesday, down 2,400 mt from 338,150 mt Tuesday.

"Sometimes the market gets caught in a mindset. At the beginning of this year the mood was set for tight supply, but what can happen is that as you approach year-end with discussions for next year, you suddenly realize that your earlier predictions might not actually be the case," the second trader added.

He said that from his perspective consumer panic surrounding lead supplies was now over.

"Some of the pressure has come off now," he said.

He added that premiums were unchanged at $70-80/mt plus LME cash for 99.985% lead in-warehouse Rotterdam.

The first trader said that he was quite optimistic for lead next year.

"Scrap is expensive and batteries are needed. There will be good demand next year," he said.

The first trader pegged premiums at $70-80/mt plus LME cash for 99.985% lead in-warehouse Rotterdam.

However, the second trader was a little more cautious on the demand outlook going forward.

"I can't see spot premiums doing anything exciting over the next few weeks. Perhaps if we get a good cold spell there might be a seasonal pick-up. However, there's a school of though that says if the cold hasn't kicked in by the second week of January, then the seasonal uptick for lead probably won't happen," he said.

Looking at the immediate market outlook a third trader was also bearish.

"I can't offer anything I'm afraid. The markets are dead."

Platts premium assessment for 99.985% lead in-warehouse Rotterdam was steady at $70-80/mt plus LME cash.

Platts assessment of SHG zinc premiums were also unchanged on week at $120-130/mt plus LME cash, in-warehouse Rotterdam.

Zinc stocks in LME warehouses dipped slightly Wednesday from Tuesday, down a modest 1,525 mt at 1,227,175 mt.

Participants still see zinc heading in the same way as aluminium, with large amounts of metal getting locked up in warehouse financing deals creating artificial tightness and elevated premia.

--Greg Smart, greg_smart@platts.com
--Ben Kilbey, ben_kilbet@platts.com
--Edited by James Leech, james_leech@platts.com

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