Nonferrous metals has strong performance and the valuation can be repaired. Non farm employment in the United States increased by 467000 in January, far better than the 150000 people generally expected by the market. In the context of the epidemic, the non-agricultural data exceeded expectations, further strengthening the Fed’s tightening expectations. The probability of raising interest rates by 50bp in March increased to 13%. In January 2022, in the face of multiple tests such as the complex and severe economic environment and the spread of the epidemic, China’s economy generally continued to recover its development trend, but the prosperity level fell. The relevant person in charge of the national development and Reform Commission previously said that the policy should be properly advanced, the infrastructure investment should be carried out moderately in advance, and strive to form more physical workload in the first quarter, Steady growth policy is expected to boost metal demand. The Fed’s interest rate hike is expected to continue to curb metal prices, but China’s steady growth expectation is superimposed on the current situation of generally low metal inventories. It is expected that metal prices will remain high as a whole. Before the Spring Festival, some enterprises released performance forecasts for 2021, and most of them achieved performance growth higher than expected. With the high operation of metal prices, the performance of non-ferrous metal enterprises is expected to continue to grow strongly in 2022. The sector may usher in a round of valuation repair market, focusing on lithium, electrolytic aluminum, rare earth, copper and other sectors.
Aluminum price is still supported throughout the year; The pace of copper destocking continued. SHFE aluminum price rose 2.4% to 21950 yuan / ton in the week before the Spring Festival, and LME aluminum price rose 0.9% to 3087 dollars / ton during the Spring Festival. According to wind data, affected by the decline of replenishment demand of downstream processing enterprises during the Spring Festival holiday, aluminum ingot inventory increased by 3000 tons to 705000 tons. The escalation of the situation in Ukraine and Russia raised concerns about the insufficient supply of overseas electrolytic aluminum, and Lun aluminum continued to rise, with Shanghai aluminum rising. In China, the limited production capacity in Yunnan and Inner Mongolia in the early stage has been resumed one after another, but the resumption progress is slow. The new production capacity can be put into operation as soon as the end of the first quarter, but most of the production time is still limited by local policies, which has not been determined yet. In terms of demand, as the Spring Festival approaches, most aluminum processing enterprises have holidays and entered the maintenance period, but the operating rate of sector, strip and foil enterprises still maintains more than 80%, indicating strong downstream demand. Considering that it is difficult to solve the European energy crisis in the short term, the strong demand for aluminum for downstream new energy, coupled with the periodic disturbance of dual control of energy consumption and “double carbon” policy, the aluminum price is still supported throughout the year. The week before the Spring Festival, SHFE copper price fell 1.4% to 70290 yuan / ton, and LME copper price rose 3.9% to 9875 US dollars / ton during the Spring Festival, returning to the central position. At present, the macro has a great impact on copper prices. The interest rate meeting of the Federal Reserve continues to be hawkish. The US GDP in the fourth quarter and non-agricultural data in January are better than expected, raising the market’s expectation of raising interest rates, and copper prices are under pressure. In terms of fundamentals, the strike of Tektronix resources highland Valley disturbed the fundamentals during the week, and the low inventory still supported the copper price. However, considering that the copper is still in the traditional off-season, it is expected to be dominated by shocks in the short term.
In January, the sales volume of new energy vehicles continued to exceed expectations, and the lithium price remained strong. The week before the Spring Festival, the price of lithium carbonate in Wuxi increased by 9.42% to 406500 yuan / ton, the price of industrial carbon and electric carbon in Baichuan increased by 6%, 7.5% to 355500 yuan / ton, the price of lithium hydroxide increased by 5% to 306900 yuan / ton, the price of spodumene increased by 0.2% to 2690 dollars / ton, and the price of lithium continued to accelerate. Near the Spring Festival, the start-up of enterprises is limited. The operating rates of lithium carbonate and lithium hydroxide decreased by 1.83% and 1.98% to 37.26% and 48.38% month on month respectively. The output decreased by 1.83% and 1.98% to 3376 and 3563 tons month on month respectively. The inventory decreased by 1.04% and 5.46% to 4944 and 346 tons month on month respectively. The lithium supply continues to be tight. Pilbara released Q4 quarterly report. The output of lithium concentrate in 2021q4 is 83500 tons, slightly lower than the guidelines, and the sales price is about 1750-1800 US dollars / ton. It is estimated that the selling price of exclusive customers in 2022q1 is about 2600-3000 US dollars / ton. In addition, ngungaju is expected to test run in 2022q1 and reach production in Q3. After stable production, an auction will be held every three weeks. On the demand side, affected by the decline of subsidies, the rise of raw material prices and other factors, new energy vehicle enterprises, including Tesla, Byd Company Limited(002594) , great wall and other vehicles, have successively raised prices, ranging from 1000 to 20000 yuan. However, at present, the sales of new energy vehicles remain strong. In January, Xiaopeng, ideal, Nezha and Weilai sold 12900, 12300, 11000 and 9700 vehicles respectively, with a year-on-year increase of 115% and 128% respectively 402%、33.6%。 The supply of lithium resources will not be significantly improved in the short term, the demand will continue to grow at a high speed, and the price of lithium will continue to remain strong. One week before the Spring Festival, lithium companies successively disclosed the performance forecast for 2021. Q4’s performance generally exceeded expectations driven by the sharp rise in lithium salt prices. We expect that the performance of lithium companies will continue to exceed expectations in 2022, and the sector is expected to usher in the valuation repair market.
In 2022, the first batch of rare earth mining and smelting indicators were issued, and the share of China rare earth group ranked second. The week before the Spring Festival, praseodymium oxide and praseodymium neodymium oxide increased by 30000 yuan / ton and 25000 yuan / ton to 952500 yuan / ton respectively, and neodymium oxide increased by 10000 yuan / ton to 1075000 yuan / ton. On January 28, the Ministry of industry and information technology and the Ministry of natural resources issued the first batch of total control indicators for rare earth mining, smelting and separation to the four rare earth groups this year, which were 100800 tons and 97200 tons respectively, of which China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) and China rare earth group won the mining quota of 60200 tons and 36900 tons and the smelting and separation quota of 53800 tons and 34700 tons respectively. Most of the downstream magnetic material enterprises stopped production during the Spring Festival, the required metal inventory was not much, and the preparation was basically completed; Metal manufacturers are optimistic about the post holiday market and have a strong willingness to stop orders and support prices.
Fed hawks continued and precious metals fluctuated downward. The price of SHFE gold fell 2.1% to 370.1 yuan / g in the week before the Spring Festival, and the spot price of London gold rose 0.9% to US $1807 / oz during the Spring Festival; The week before the Spring Festival, SHFE silver fell 7.4% to 4703 yuan / kg, and the spot price of London silver rose 0.2% to 22.5 US dollars / ounce during the Spring Festival; The real yield of us 10-year Treasury bonds rose 11pct to – 0.48%; SPDR’s gold position was 1011 tons and SLV’s silver position was 16800 tons, basically the same as last week. The Fed’s interest rate meeting said that it would keep the interest rate unchanged at 0-0.25%, suggesting that it would raise interest rates in March and begin to shrink the table. Superimposed on the US January non-agricultural data, the expectation of interest rate increase was strengthened again, the short-term support brought by uncertainty and risk aversion was weakened, and precious metals were under pressure. Considering that the epidemic still has an impact on U.S. employment and economic recovery, we need to continue to pay attention to the inflection point of inflation data and the recovery of the job market.
Investment suggestions: in the context of the “double carbon” goal, pay attention to the historic investment opportunities of new energy and new materials, and focus on new energy metals with strong demand and weak supply pattern (lithium cobalt nickel rare earth) and new metal materials benefiting from industrial upgrading and domestic substitution. In 2022, non-ferrous metal prices will remain high as a whole, corporate profits are expected to continue to increase significantly, and the valuation of the sector will return to a low level. Under the background of China’s continued loose monetary policy, we expect the valuation of the non-ferrous sector to repair the market. Lithium suggests paying attention to Tianqi Lithium Corporation(002466) , Ganfeng Lithium Co.Ltd(002460) , Yongxing Special Materials Technology Co.Ltd(002756) , Chengxin Lithium Group Co.Ltd(002240) , etc; It is suggested to pay attention to Guangdong Haomei New Materials Co.Ltd(002988) , Guangdong Hoshion Aluminium Co.Ltd(002824) , Jiangsu Pacific Quartz Co.Ltd(603688) , Ningbo Boway Alloy Material Co.Ltd(601137) etc. for new materials; Titanium suggests paying attention to Baoji Titanium Industry Co.Ltd(600456) , Sichuan Anning Iron And Titanium Co.Ltd(002978) , Western Metal Materials Co.Ltd(002149) , etc; It is suggested to pay attention to Sino-Platinum Metals Co.Ltd(600459) , Chifeng Jilong Gold Mining Co.Ltd(600988) , Yintai Gold Co.Ltd(000975) etc. for precious metals; It is suggested to pay attention to Yunnan Aluminium Co.Ltd(000807) , Henan Shenhuo Coal&Power Co.Ltd(000933) , Western Mining Co.Ltd(601168) , Zijin Mining Group Company Limited(601899) , Lizhong Sitong Light Alloys Group Co.Ltd(300428) , Sunstone Development Co.Ltd(603612) etc. for industrial metals.
Risk factors: the downstream demand has fallen more than expected, the supply side constraint policy has shifted, and China’s liquidity easing is less than expected; The US tightened liquidity more than expected; Metal prices fell sharply.
