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LME Warehouse Levels: Support to Base Metals

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LME base metal warehouse levels

Except for tin, the LME (London Metal Exchange) warehouse levels of all base metals dropped in the week ended October 30, 2015. The decline in warehouse levels is considered a positive sign for base metal prices, but the Chinese demand concerns are still weighing on base metals. This article explains the movement in LME warehouse levels of base metals in the week ended October 30.

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LME warehouse levels

LME warehouse levels for copper fell by 3.7% and recorded as 267,775 metric tons. Since the end of August, LME copper warehouse levels have been in a downtrend. In the same period, prices stopped falling and started consolidating for two months. Even though falling warehouse levels and supply cuts by copper miners must result in an uptrend, the Chinese demand concerns are still weighing on LME copper prices.

LME aluminum warehouse levels dropped by 1% and reached 3,039,575 metric tons by the end of the week. The aluminum warehouse levels in the LME are in a complete downtrend and dropped by 28% since the beginning of the year, unable to stop the downfall of aluminium prices due to a decrease in demand.

LME nickel warehouse levels fell by 1% and reached 423,876 metric tons by the end of the week ended October 30. Nickel warehouse levels in the LME recorded a peak level of 470,376 metric tons in June and in a downtrend ever since. Since June, LME Nickel warehouse levels fell by 10%. LME warehouse levels for zinc and lead fell by 1.4% and 0.7%, respectively.

Unlike other base metals, stock levels of LME tin increased 10.5% and reached 5,015 metric tons by the end of the week. By studying the warehouse levels of base metals in the LME, it can be observed that the trends in warehouse levels are supporting the base metal prices, and the real trigger of a bullish move can come from China.

The support from the Chinese economy can result not only in bullish moves in base metal mining companies such as Freeport-McMoRan (FCX), Alcoa (AA), Rio Tinto (RIO), BHP Billiton (BHP) but also in major base metal ETFs such as the SPDR S&P Metals and Mining ETF (XME).

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