Base metals rallied further on Monday morning with many near their highest prices in two months as renewed optimism about demand buoyed the markets.
The metals have been weighed down by concerns over the strength of the global economic recovery in recent months, while easing demand growth in China has added to the negative sentiment.
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But last week a raft of positive economic datapoints appeared to reverse that sentiment. On the London Metal Exchange on Monday, nickel for delivery in three months rose 1.15 per cent to $20,660 a tonne, its highest level since the end of May, while tin was up 1.4 per cent at $19,450 a tonne – just below the two-year peak it reached when it spiked 9.5 per cent on Friday.
Copper, which is seen as a barometer for the global economy, rose to a peak of $7,088 a tonne, just short of a two-month high, and a 0.8 per cent gain.
David Wilson, metals analyst at Société Générale in London, said that positive macroeconomic data last week had been "highly supportive in terms of sentiment towards the base metals complex".
"The question is," Mr Wilson added, "can momentum be maintained, or will it fade out as shorts are covered?"
Physical fundamentals for many of the metals are painting an increasingly positive picture. Inventories of metals such as copper, nickel and tin have fallen sharply in recent months, with copper inventories at LME-registered warehouses down 25 per cent since February. LME stocks of tin have fallen 44 per cent since January.
That has buoyed physical premiums – the cost of the metal for immediate delivery at its end-use destination compared with the futures price – indicating robust demand and a lack of immediate availability of metal.
Meanwhile, prices of iron ore, a key industrial commodity that is less exposed to investor sentiment as it has no futures market, have recovered 8 per cent after plunging 36 per cent since April. The Baltic Dry Index of freight costs, viewed by some as a leading indicator of the global economy, is up 7.5 per cent over the past week following a precipitous drop of almost 60 per cent since May.
Elsewhere in commodity markets on Monday, sugar prices remained close to four-month highs as a logjam at Brazilian export ports supported the market. ICE October raw sugar was 1.5 per cent stronger at 18.54 cents a pound.
In oil, Nymex September West Texas Intermediate dropped 47 cents to $78.51 a barrel, while ICE September Brent was 40 cents lower at $77.05.
