China Metals' Persistent Rally Needs Substantial Growth in Demand, Analyst

BEIJING, June 3 -- The current ample capital fluidity has exerted prominent effects on China's nonferrous metals prices but the metals' following rally still depends on substantial growth in demand, some analysts said at a forum Monday.

    The China Federation of Logistics and Purchasing (CFLP) said Monday the Purchasing Managers' Index (PMI) of China's manufacturing sector stood at 53.1 percent in May. The continuous stay of above 50 shows Chinese economy continued on its way to recovery and foretells nonferrous metals consumption will keep warming up, analysts hold.

    However, Shi Weiping, an analyst with Orient Securities said that the market's expectation for inflation was heating up with improving fluidity, which may lead to sharp fluctuation of staple commodities prices.

    If the present production capacity can't be digested by actual demand in the following period, metals market is likely to slip back, Shi added.

    Yan Wei, economist with Orient Securities, noted that the capital fluidity will remain abundant and China's economy is expected to see substantial recovery in the second quarter, adding that the government will hold on the easy monetary policy to boost economy.

    According to Shi, the domestic copper market has shown faltering signs as the gap between spot price and futures price becomes narrowed. The tight zinc supply has been greatly relieved, while aluminum market is better than that for the first quarter despite the continuing overcapacity and heavy stocks.

    (Source: chinamining.org)