… we believe there is growing evidence to suggest that non-China metals demand is recovering, albeit to varying degrees for each metal.

Furthermore, the arguments used to support bearish views are steadily weakening; nearby time spreads are narrowing while LME inventory cancelled warrants are on a steady uptrend. This may finally convince those traders, analysts and reporters who had attributed price rises to “speculation” that the fundamentals have indeed been improving.

The narrowing in spreads tells us that availability is tightening, which together with the improving inventory picture makes for a positive price outlook, in our view, and given the build in short positions during the recent sell-off this also raises the potential for short-covering rallies.