(Updates with closing prices)
By Peter Hobson
LONDON, July 26 (Reuters) - Lead prices were set for a third weekly gain as production outages tightened supply of the metal used in batteries and drove stockpiles in London Metal Exchange (LME) warehouses to the lowest in 10 years.
Benchmark lead closed down 2.3% at $2,065 a tonne, with most other industrial metals also falling as weak economic data undermined the outlook for demand.
But prices were still up nearly 1% for this week and have risen more than 15% from a three-year low in May.
A combination of smelter closures and a crackdown on polluting industry in China has caused supply to undershoot expectations, supporting prices, said BMO analyst Kash Kamal.
But he said weak long-term projected demand meant prices should remain around $2,000.
LEAD STOCKS: Headline lead inventories in LME-registered warehouses at 55,475 tonnes have halved this year and are the lowest since 2009. MPBSTX-TOTAL
LEAD SPREAD: The discount for cash lead against three-month metal on the LME has disappeared, pointing to tighter nearby supply. CMPB0-3
SUPPLY: Global supply of refined lead will exceed demand by 71,000 tonnes in 2019 after a deficit in 2018, the International Lead and Zinc Study Group (ILZSG) said in May.
However, outages at two large refineries in China and Nyrstar's Port Pirie smelter in Australia had likely reduced output by around 50,000 tonnes, analysts at ING said in a note.
"Going forward, the risks of supply pointing to the downside are still high," they said, adding that the surplus could be smaller than expected or the market could become balanced.
Around 12 million tonnes of lead are consumed each year.
YUGUANG: China's Henan Yuguang Gold and Lead Co said it had resumed production at its 400,000 tonne a year lead smelter in Jiyuan.
GLOBAL ECONOMY: Manufacturing output is slowing in key markets including China, Europe and the United States, and the U.S. economy likely grew at its slowest pace in more than two years in the second quarter.
TRADE WAR: A U.S.-China trade war has harmed growth and pushed metals prices sharply lower. Lead negotiators for both countries will meet in Shanghai on Tuesday for two days in the next round of talks.
DOLLAR: The dollar strengthened back towards two-year highs reached in May, pressuring metals by making them more expensive for buyers with other currencies.
ALUMINIUM: Russia's Rusal reported a 21% rise in second quarter aluminium sales compared to the previous quarter.
TIN: Indonesia's largest tin miner PT Timah expects to more than double its refined tin production this year to around 70,000 tonnes.
CHINA STEEL: Small steel mills in China are ramping up production.
OTHER METALS: LME copper did not trade in closing rings but was bid down 0.7% at $5,963 a tonne. Aluminium finished 1.3% lower at $1,802, zinc fell 0.1% to $2,438 and tin slipped 1.1% to $17,650. Nickel bucked the trend to rise 0.2% to $14,100.
All but zinc were down this week.
Reporting by Peter Hobson; Additional reporting by Mai Nguyen; Editing by Edmund Blair and Kirsten Donovan