Renewed concerns over tight supplies and expectations of strong demand in the last quarter of the year sent lead prices to a record high on Thursday, while copper rose to a two-month high on a weak dollar.

Lead for three-months delivery on the London Metal Exchange set an all-time high of $3,520 a tonne before closing at $3,440, down $5 from Wednesday on profit-taking.

The metal, mainly used in the battery industry, trimmed some of its earlier gains after LME inventories showed a rise of 200 tonnes, bringing total stocks to 22,000 tonnes -- still less than a day's global consumption.

The lead market's very tight right now and there does not seem to be any sign of relief any time soon, said analyst Kevin Norrish at Barclays Capital.

According to LME data more than 90 percent of available lead stocks in LME warehouses are held by one market participant, putting upward pressure on prices.

Also, lead shipments via Esperance from a mine run by Magellan Metals have been suspended since March after thousands of bird deaths due to lead contamination.

But a new probe by an Australian state government into lead contamination at the key port, following the discovery of high levels of lead in rainwater tanks, has further boosted prices.

I would not say it is a shock ... but it is a confirmation that the world is going to be without Magellan concentrates for a very long time, Norrish said.

Magellan, owned by Canada's Ivernia Inc., accounts for 3 percent of the world's mined lead.

U.S. SLOWDOWN

European shares traded higher with the FTSE 100 index of Britain's leading shares gaining 0.83 percent. But mining shares weighed in London, with Vedanta and Kazakhmys falling 2.47 percent and 1.69, respectively.

The market digested U.S. economic data with August new home sales dropping more than expected to a 795,000 annual sales pace, its slowest rate in more than seven years.

This number would indicate that the U.S. slowdown is worsening and that the need for metal inputs would be lowered, analyst David Thurtell at BNP Paribas said.

U.S. initial claims for state unemployment insurance benefits dropped to a lower-than-expected 298,000 and the U.S. economy grew at a revised 3.8 percent annual rate in the second quarter.

The GDP figures were in line with previous estimates, but the initial jobless claims were very low, Thurtell said.

Three-months copper rose to $8,099.75, its highest since July 24 and ended at $8,020, up $80 from Wednesday.

The dollar fell to a new record low against the euro for a sixth successive session.

Dollar's weakness against the euro is a good supportive factor upside in base metals, an LME trader said.

Looming industrial action at Southern Copper in Peru next week, the weak dollar and low inventories with a single dominant position holding around 90 percent of the warrants also underpinned prices.

Three-months zinc rose 3 percent or $90 to $3,075 and aluminum was up $27 at $2,495.

Zinc ... technically looks extremely robust, and on track to run towards the $3,200/t area, analyst Michael Jansen at JP Morgan said.

Nickel was at $31,800 versus Wednesday's $32,400/32,500, while tin closed higher at $15,425 from

$15,250/15,300.

Metal Prices by 1700 GMT:

Metal Last Change Pct Move End 2006 Ytd Pct

move

LME Cu 8015.00 75.00 +0.94 6330.00 26.62

SHFE Cu* 67510.00 100.00 +0.15 60080.00 12.37

LME Alum 2488.00 20.00 +0.81 2805.00 -11.30

SHFE Alu* 19370.00 20.00 +0.10 20550.00 -5.74

COMEX Cu** 363.25 2.25 +0.62 287.10 26.52

LME Zinc 3060.00 75.00 +2.51 4230.00 -27.66

SHFE Zinc* 26745.00 310.00 +1.17 28915.00 -7.50

LME Nick 31800.00 -1300.00 -3.93 33325.00 -4.58

LME Lead 3390.00 -55.00 -1.60 1670.00 102.99

LME Tin 15350.00 -50.00 -0.32 11510.00 33.36 ** 1st contract month for COMEX copper * 3rd contact month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07

(Additional reporting by Anna Stablum in London and Nick Trevethan in Singapore)

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