The JP Morgan manufacturing Purchasing Managers Index (PMI) in February reached 50 points for the first time since August 2022, and in March rose to 50.6 points. A PMI increase above 50 means that the manufacturing sector is growing across various industries. However, market players report that the recovery in the index reflects seasonality and is unlikely to sustain a long-term upward trend, as consumer demand is fundamentally weak.
Base metals on the LME reacted to the improvement in business activity by showing a 2-7% m-o-m rise in March and in early April most of the metals continued to rise. As of 9th April, tin futures were up 11% m-o-m; copper and aluminum up 9% m-o-m; zinc up 5% m-o-m.
Source: Mintec Analytics
Industry sources say that, fundamentally, metal consumption is not showing sufficient growth to provide sustainable price growth, while the stocks accumulated at the LME are at a high level and are able to cover a significant deficit.
Investor speculation is the key driver as investors returned to the market following a prolonged period of flat prices since April 2023. This contributed to PMI index growth above 50 points.
Consumers of base metals remain cautious about price growth and do not seek to increase purchases and create inventories, as they see no fundamental signs of further sustainable price growth.
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