Uncertainty in Metals Prices despite Uptick in Global Manufacturing

SHANGHAI, Feb. 2 (SMM) -- An uptick in manufacturing data of major economies on February 1 sent European and US stocks and metals prices significantly higher. The upward run can barely last, however, given the slowing global demand. Shanghai metals again begin to swing today.

According to China Federation of Logistics and Purchasing, China’s manufacturing Purchasing Managers’ Index (PMI) climbed 0.2 percentage point to 50.5% in January. Among its 11 sub-indexes, the production index, new order index, purchasing price index and raw material inventory index climbed while others dropped. The purchasing price and raw material inventory sub-indexes saw larger gains of over 1 percentage point. The backorder, product inventory and import sub-indexes saw heavier losses of over 2 percentage points. The HSBC China Manufacturing PMI released on the same day came at 48.8, indicating lasting weakness in China’s manufacturing industry. A reading below 50 reflects contraction. In the face of a further drop in new business and output, purchasing volumes declined sharply, leading to cuts in stocks at many businesses.

Data from the US Institute for Supply Management on February 1 show the US manufacturing PMI climbed from 53.1 to 54.1 in January (the preliminary figure is 53.9), indicating further expansion of the US manufacturing industry. The measure for the euro-zone stayed below 50 the equilibrium line for a sixth consecutive month despite a climb from 46.9 to 48.8, signaling the euro-zone economy is heading toward recession. UK’s manufacturing PMI climbed to 52.1, its highest level since March 2011. The uptick in European manufacturing data pushed LME metals to their highest levels during recent months. However, a further rebound in metals may be far away given volatility in Chinese stock markets and in the face of profit-taking on worries towards the European debt crisis. New orders at producers after resuming production following the Chinese New Year will largely determine moving trends of metals prices.

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