China: Metals demand has been stronger than expected – Goldman Sachs

Research Team at Goldman Sachs, notes that the latest rally in metals prices began well before the US election, catalysed by the release of China’s October manufacturing PMI (on November 1), which rose by a stronger than expected 0.8pts mom to 51.2, rising to its highest level since July 2014 - its 4th highest print for 4 years (N.B. China’s PMI range has been 49.2-51.7 over the period).

Key Quotes

“Alongside this, we have seen inventories decline by more than anticipated across a number of base metals, with the main culprit in our view likely to be strength in Chinese metals demand (most notably, property related consumption).”

“Post Mr Trump’s election win we have seen metals rally further, with copper leading the way in part as a ‘catch-up’ trade but also as copper is likely the main proxy by which the market has traded a more bullish view on global growth and inflation. Further, RMB depreciation over the past month in the context of a property crackdown has likely seen speculative investment enter the Chinese metals markets.”