Barclays: Base-Metals Outlook Improving Although Risks Remain

The recent release of manufacturing purchasing managers indexes for December suggests that global base-metals demand is stabilizing and recovery appears more robust than a couple of months ago, say analysts with Barclays Capital. Previously, the upturn was biased toward a recovery in the U.S. Now, the outlook for China and Europe has improved, although it remains vulnerable, Barclays says. While the recovery road still looks “bumpy,” overall year-on-year base-metals demand should stabilize toward the end of the first quarter and into the second quarter, Barclays says. Some volatility is likely to remain. For instance, Barclays economists anticipate a decline in China’s January PMI due to the timing of the Chinese New Year. “Property market activity and export growth is also expected to slow further, but this is likely to be already priced into consensus forecasts,” Barclays says. “In Europe, the debt situation is far from having been solved. All in all, the key message to take away is that the outlook is now brighter than it was a couple of months ago though with big risks.”