London (Platts)--31Oct2012/949 am EDT/1349 GMT

Reported lead stocks have risen recently, mainly as a result of metal previously withdrawn from LME warehouses in Asia being delivered back on to warrant elsewhere in the world, investment bank Macquarie said in a research note Wednesday.

"However, with open lead warrants in accessible LME locations at around three-year lows, availability may be less than headline numbers suggest at a time of year when lead demand is typically strong for seasonal reasons and lead-making raw materials remain expensive," the bank said.

Macquarie said that the rise in LME lead inventories is therefore not necessarily representative of a rise in available metal.

The bank said that cancellations had also increased to all-time record highs and that the remaining stocks actually available to the market had risen little higher than 2010 levels.

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"Over 130,000 mt of LME lead stocks are currently canceled, according to the latest LME data, an all-time record, leaving 194,500 mt on warrant, but even this does not paint the full picture," it said.

Macquarie said that of the stocks on warrant only 119,325 mt -- 60% of the total -- was in accessible locations, namely Antwerp, Detroit, Johor and Vlissingen.

Given the current warehouse queues at these locations the bank says that it would take months before new deliveries could be withdrawn.

"This leaves on warrant LME lead stocks in accessible locations at around three-year lows of around 75,000 mt," Macquarie said.

The bank said that these developments came at a time when demand for lead was seasonally high due to increased replacement battery demand in the northern hemisphere.

Macquarie adds there has also recently been positive feedback on the prospects for lead metal demand from a succession of major industry events with the focus on increased use of lead-acid batteries in HEV's.

The bank also notes that raw material supply is uncertain with lead concentrates increasingly difficult to treat, while China's lead mine output appears overstated.

In the secondary market, scrap also remains expensive which is squeezing producer margins, the bank added.

"With available lead stocks potentially limited, the short-term outlook for lead demand supported by seasonal factors and lead supply challenged, the fundamental outlook for lead prices is positive," it said.

Three-months lead was trading at $2,059/mt on LMEselect at 1140 GMT Wednesday.

--Greg Smart, greg_smart@platts.com
--Edited by Jonathan Dart, jonathan_dart@platts.com

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