Metals Continue to Drop on Negative News

SHANGHAI, Jun. 4 (SMM) – Given the supply surplus in the market and unresolved European debt crisis, base metals have been declining recently. Coupled with PMI figures released on weekend and the disappointing US nonfarm payrolls, investors held a bearish outlook with metal markets both at home and abroad in sluggishness. SMM expects metals will continue the downward trend in short term influenced by the serial negative news.

China’s May PMI figures from HSBC and the China Federation of Logistics & Purchasing (CFLP) were both down from a month ago. The PMI in May was down 2.9 percentage points from that in April to 50.4%, according to the CFLP. The sub-index for new orders dipped below 50% in May, down 4.7 percentage points to 49.8%, indicating shrinking demand in the manufacturing sector. Purchasing Price Index of Raw Material fell to 44.8%, down sharply by 10.0 percentage points, suggesting lower prices for purchasing major raw materials and moderated inflationary pressures. The final reading of HSBC PMI for May remained in contraction for the 7th consecutive month at 48.4.

According to US Department of Labor, US nonfarm payrolls rose 69,000 after seasonal adjustment, much lower than the expected growth of 150,000 jobs. The preliminary figure for April was 115,000 and later revised down to 77,000, while the figure in March was revised to 143,000 from the initial 154,000, implying the end of a moderate recovery in the US. Nevertheless, US ISM PMI in May was down from 54.8 recorded in April to 53.5, according to Institute for Supply Management, lower than the expected 53.9, showing the tough situation for US economic recovery. In European, Markit reported in its survey that euro zone manufacturing sector presented the most severe contraction in May due to the impact of the European debt issue and poor orders within the sector. The shrink in euro zone’s manufacturing sector has spread to major economies in European.

Commodities prices have been falling due to the lackluster demand, and the negative economic circumstances at present will be adverse to metal markets. As such, metal prices are expected to drop further in the near term.