By Allen Sykora
Sentiment in LME base metals has improved with to the mood in other markets, plus inventory draws are supportive, say analysts with Barclays Capital. “The more risk-friendly environment continues to benefit the metals and was further supported by the stronger-than-expected U.S. manufacturing PMI,” Barclays says.

Copper continued to rise Monday. LME open-interest data suggest that the recent rise has come partly as new longs are established, while Zinc benefited from short covering, Barclays says. “We believe that for as long as the risk-on sentiment remains, prices will be supported.”

Further, LME inventory data show a continuation of the trend of stock declines and elevated cancelled warrants levels, the bank says. Stocks fell for every base metal Monday, with aluminum experiencing the largest drop of around 12,200 metric tons, taking the draw over the past month to some 216,000, with inventory falling across every region. Zinc stocks also fell, while canceled warrants rose to over 6% of total inventory.

“The movement in stocks comes at a time when, for seasonal purposes, usually stocks would tend to rise. We believe that these counter-seasonal stock moves are reflective of both metal relocation (between warehouses) and solid underlying demand,” Barclays concludes.

By Allen Sykora of Kitco News; asykora@kitco.com

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