Global manufacturing output slipped for a second month in
July 2019, depressing demand for industrial minerals, according
to a combination of purchasing managers’ index
(PMI) survey data and market feedback.
The JP Morgan Global Manufacturing PMI for global
manufacturing production registered 49.3 during the month, down
from 49.4 in June, marking two consecutive months of readings
below the 50 mark, which indicates flat performance.
"Production and new order intakes declined further, because
conditions in many domestic markets remained soft and
international trade volumes continued to contract," the JP
Morgan PMI commentary said.
China’s official manufacturing PMI for July,
published by its National Bureau of Statistics, came in at
Weaker demand in China contributed to a fall in factory
producer prices for the first time in three years in July, with
Chinese manufacturers feeling the strain of the intensifying
trade war with the United States. Overall exports from the
country increased by 3.3% year-on-year in July in dollar terms,
however, recovering from a 1.3% drop in June.
China’s factory gate prices, which represent a
range of manufactured products, raw materials and mining
output, fell by 0.3% in July, the statistics show, the first
drop since August 2016.
Minerals traders said that they had noticed a slowdown in
July which was consistent with seasonal trading norms, but
which they fear may persist for longer than usual.
UK 'not bothering’ to stockpile for
The drop in UK manufacturers’ output was the
steepest in seven years in July, with growth being choked by
worries over Brexit - the UK’s planned exit from
the EU - and weaker global demand.
July’s PMI data showed that output from UK
factories declined to 47.0, its lowest level since 2012.
Manufacturers’ stock levels were fairly stable
during the month, because some businesses continued to run down
inventories that were built up during a stockpiling frenzy
ahead of the original Brexit deadline of March 29, 2019.
The PMI data suggested that some have started to build up
again in preparation for the new Brexit deadline of October 31,
but so far this has not translated into a noticeable increase
in demand for key raw materials, such as industrial minerals
"Concerning our British customers, we have not seen major
turbulence yet," one supplier of refractory minerals and
speciality carbon products to UK industrial customers said. "I
would have expected to see a situation similar to that seen
early this year, when exporters were called on to put lots of
stock into the UK before Brexit, because no one knows what will
Industrial minerals traders said that they did not raise
prices for UK customers amid the first quarter’s
panic-buying, other than to cover additional expenses incurred
in sourcing larger-than-usual volumes at short notice.
They added that some buyers still have stock left over from
this period and were reluctant, or unable, to embark on another
Businesses reported that the weaker sterling - which hit a
two-year low against the dollar in early August, when GDP data
showed a 0.2% contraction in the UK economy in the second
quarter of 2019 - was pushing up the cost of some imports.
But overall, UK PMI data showed that raw material costs in
July rose at their slowest rate for three years, and so did the
prices at which manufacturers sold their goods.
"The latest GDP data show that firms across the economy
added to the stocks of goods rapidly in [the first quarter],
but then depleted most of the stocks they had accumulated in
[the second quarter]," Samuel Tombs, chief UK economist at
research consultancy Pantheon Macroeconomics, said.
"Ahead of the next Brexit deadline, stockpiling will
probably increase again, especially since markets see a much
greater chance of a no-deal Brexit - about 40% - than they did
in the run-up to the March deadline," he added.
The JP Morgan PMI reported that the manufacturing outlook
became less positive in July, with surveyed companies
expressing concern about trade tensions, Brexit, geopolitical
instability and currency movements.
Industrial mineral exporters to the UK said that they could
not predict demand levels over the coming months, because
sudden policy moves on Brexit could trigger a mass change in
importers’ behavior, while the continuing
uncertainty will leave businesses to make individual decisions
on stock levels.
Almost half of the businesses surveyed (46%) for the July
PMI said that they expected order figures to rebound after
Brexit, whatever the outcome of the UK’s deal
negotiations with the EU.
On August 1, new UK Prime Minister Boris Johnson announced
plans to create as many as 10 freeports to avoid the likely
increase in costs and bureaucracy associated with physical
goods trading if the UK does indeed leave the EU single
As they are operated elsewhere in the world, freeports are
free trade zones where imported goods and raw materials can be
held, processed or used to manufacture products free of customs
duties before being exported.
The plans have received a mixed reception from UK
businesses, due to fears that the suggestion has been rushed
out without being tested and was not designed for the UK