SHANGHAI, Oct. 9 (SMM)－China’s official PMI is 52.4 in September, refreshing new high from May 2012, showing short-term recovery of the manufacturing industry. But Caixin Manufacturing PMI slumps to 51.0 which deviates from official PMI. What does this deviation reflect? What effect will this have on metals?
Jiang Xingchun, institute director of Dongwu Futures says, the deviation is mainly caused by statistic specification. Official statistics mainly focuses on large and medium size enterprises while Caxin statistics includes some enterprises under strict production limit due to environmental protection. The Caxin Index reflects price rise of raw material is imposing pressure on downstream enterprises and environmental protection policies restrain demand. But two indexes are still in expansion range so fundamentals of economy is good. For nonferrous metals, it would be slight good news but slight bad news for ferrous and chemical industries.
Jing Chuan, vice general manager of Zhongda Futures, believes the deviation of two PMIs indicates obvious differentiation of manufacturing industry. Large-scale state owned enterprises which is the majority of manufacturing industry remains to recover with supply side reform while medium and small size enterprises become weak due to insufficient consumption but they are still running in expansion range. Impact of environmental protection storm on privately owned enterprises is greater that large scale state owned companies. Whether PBoC’s targeted cuts to required reserve ratios can eliminate the gap remains to be observed. Since nonferrous metals are commodities of global pricing and large companies are still in good development, so periodical rise of nonferrous metals will not change.
Some market participant thinks official PMI in September indicates vigorous internal and external demand and improved supply-demand situation, which promotes production and willingness of producers is strong. But Caixin PMI indicates demand of end-consumers weakens again and industrial production is mixed, which means the rising fundamental of manufacturing industry is not firm. The purchase price of raw materials refreshes new high within this year. The rise increases profit and production of upstream enterprises but cost pressure of downstream enterprises goes up and continuity of improved profit and production remains to be observed. It is estimated the boost effect of official PMI is limited and the metal prices are still decided by respective fundamentals.
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