Commodities Comment-Oct manufacturing PMIs: US surge,Eurozone stabilises, EMs fall
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Global manufacturing output continued its modest growth in October,according to the latest manufacturing PMI data, largely thanks to anaccelerating USA. Other developed markets saw a weak bounce; mostemerging markets continue to struggle.
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Palladium outperformed on Monday, regaining $800/oz in intra-day tradingand up 1.9% DoD. For the base metals, aluminium and lead were theoutperformers, gaining 0.9% and 1.0% respectively. Gold steadied around$1,170/oz, only slightly higher than the new four-year low it hit in early trading.
Chinese lead smelters have lobbied the government to cut or remove the17% tax applied to silver contained in imported lead concentrates. Theexemption will help offset some of the losses domestic smelters are currentlysuffering on imported materials. Chinese lead concentrate import increasedby 20% YoY through January to September despite unfavourable arbitrageyear-to-date. The key reason behind local lead smelters’ increased overseaspurchases is tight domestic mine supply so far this year. Chinese domesticlead concentrate production is down 7.5% YoY through January to Septemberamid weak price and environmental regulation. Although Chinese importersprefer low-silver concentrate, such materials are difficult to source and leadsmelters usually make a loss by processing the silver content in theconcentrates. Tax removal would help smelters reduce the overall loss. Thetax adjustment could be in the form of export tax rebates or import taxexemption. Local enterprises are still waiting for the approval from the Ministryof Commerce.
The world’s largest coal producer, Coal India (CIL), has reported very strongoperational performance for October. Production was up 15% YoY to 40mtand offtake was up 10% YoY to 39mt, attributed to good weather and theopening of a new 12mtpa mine in July, even though the mine is yet to beconnected to the rail network (helping to explain why production is runningahead of sales). This means that in the fiscal year to date (starting Apr’14),production and offtake are up 6.6% and 3.6% YoY respectively. Although stillbelow target, the growth levels are a marked improvement on productiongrowth of just 2% CAGR seen over the past 4 fiscal years. All of this comes atan interesting time for the Indian coal industry, given that the Indiangovernment is considering private sector involvement in the commercial coalmining sector for the first time. CIL’s inadequate domestic supply performanceover the past few years and a rising import bill has clearly been a key driver.
South African platinum exports rose to 337k oz in September, 29% higherMoM though still 22% lower YoY. The country’s palladium exports were 137koz, 8% lower MoM and 33% down YoY. The platinum exports wereconsiderably higher than we had forecast, and of a size that suggests miningcompanies were still able to sell additional metal from stockpiles.
