Nonferrous Metals: China's steady growth will continue, and the relative income of industrial products will continue

[Key words of this week]: China's social finance data in January greatly exceeded expectations, the CPI of the United States hit a new high in 40 years, and the sales of electric vehicles in Europe increased by 27% year-on-year in January, weakening seasonally month on month; Wodgina's phase I resumption of production is planned to be advanced to April 22; The listing price of praseodymium and neodymium oxide decreased by 0900 yuan / ton in February.

Market review: 1) in terms of small metals, the penetration rate of new energy passenger vehicles is close to 20%, and the prosperity of the industry continues to rise. The prosperity trend of cobalt, lithium and rare earth in the upstream of new energy vehicles is clear and continues to be optimistic: ① the inventory of lithium ore in the industry is low, the reluctance to sell in the upstream is obvious, and the price has accelerated. This week, the lithium concentrate has increased by 4.2% month on month, and the battery grade lithium carbonate has increased by 3.9% month on month, The price of electric carbon is close to 400000; ② With the outbreak of the epidemic in South Africa, cobalt prices accelerated upward, and MB cobalt rose by 1.0% this week; ③ In terms of rare earth, the downstream actively inquired for orders after the festival, and the quotation of praseodymium and neodymium oxide rose 8.7% this week. 2) China's capital is expected to be fully relaxed, the policy direction of steady growth is very clear, and the resumption of work after the festival will boost downstream demand; US inflation data reached a new high since March 1982, and the expectation of raising interest rates increased to limit the growth of base metals: ① base metals, LME, aluminum and copper increased by 3.6% and - 0.5% respectively; ② The real yield of 10-year US bonds rose from - 0.48% → - 0.51%, and Comex gold closed at US $1842.1/oz, up 1.90% month on month. 3) A shares rebounded overall this week. Shenwan nonferrous metals index closed at 5484.28 points, up 6.83% month on month, outperforming the Shanghai Composite Index by 3.81 percentage points. The gains and losses of rare metals, industrial metals, gold and new metal and non-metallic materials were 10.91%, 10.75%, 3.44% and - 0.51% respectively.

Macro "three factors" summary: the reverse of China US policy cycle remains the same - China's capital is expected to be fully relaxed, and the social financing and credit data reached a new high in January; The US inflation data hit a new high since March 1982, and the expectation of raising interest rates and tightening is still strengthening; In January, the adjusted CPI in the euro zone rebounded year-on-year, and the epidemic cooled down. Specifically: 1) in China, the social financing and credit data in January reached a new high. The social financing scale in January was 6.17 trillion yuan (the former value was 2.37 trillion yuan), the stock of social financing scale was 10.5% (the former value was 10.3%) year-on-year, and the new RMB loans in January were 3.98 trillion yuan (the former value was 1.13 trillion yuan, the expected value was 3.77 trillion yuan); In January, M0 was 18.5% (previous value 7.7%), M1 was - 1.9% (previous value 3.5%), and M2 was 9.8% (previous value 9.0%); In January, China's foreign exchange reserves amounted to 322.632 billion US dollars (the previous value was 3250.166 billion US dollars). 2) In the United States, CPI rebounded year-on-year in January. In January, CPI in the United States was 0.6% (the previous value was 0.6%) quarter on quarter, 7.5% (the previous value was 7.0%) year-on-year, and higher than 5% for nine consecutive months; Core CPI was 0.6% quarter on quarter (the previous value was 0.6%), and core CPI was 6.0% year-on-year (the previous value was 5.2%); The number of initial claims for unemployment benefits disclosed this week was 223000, down 16000 month on month; In addition, the number of newly diagnosed covid-19 in the United States fell. From Monday to Friday, a total of 1211200 cases were diagnosed in the United States, with an average daily increase of 242200 cases and a month on month decrease of 141500 cases. 3) The euro zone's January adjusted CPI picked up year-on-year, and the epidemic cooled down. The euro zone's January adjusted CPI was 0.3% (the previous value was 0.4%) month on month, and 5.1% (the previous value was 5.0%) month on month; This week, the UK, Germany and France added 454248.2 cases of covid-19 on a daily basis, a decrease of 263421.6 cases compared with last week, and the epidemic has cooled down. 4) The rhythms of various economies are different, but the decline direction of the global overall prosperity remains the same. In January, the global pmi51 4. It fell 2.9 month on month.

Base metals: China's "steady growth" is clear, and the resumption of work after the festival will boost downstream demand, but overseas interest rate hikes are expected to increase and limit growth

China's capital is expected to be fully relaxed, and the policy direction of steady growth is very clear. In addition, enterprises return to work after the festival, and downstream demand increases slowly; Overseas, investors' concerns about low global inventories increased, but driven by high inflation data, the market's expectation of the Fed's interest rate hike in March increased, limiting the rise of base metals. Specifically, LME copper, aluminum, lead, zinc, tin and nickel rose or fell by - 0.5%, 3.6%, 3.5%, 1.1%, 1.6% and 1.4% respectively this week.

1. For electrolytic copper, there is no obvious driving force from the fundamentals, the overall supply and demand are weak, the mining end is disturbed, and investors are worried about the tightening of global copper inventory. China's social inventory accumulation is lower than expected, which is still at a low level in previous years, forming a strong support for the price. On Wednesday, the social inventory of electrolytic copper was 177000 tons, and the weekly cumulative inventory was 26400 tons.

2. For electrolytic aluminum, on the supply side, China's electrolytic aluminum output has gradually increased, but the total operating capacity is lower than that of the same period last year. In addition, an epidemic broke out in Baise, Guangxi, involving a reduction of more than 400000 tons of electrolytic aluminum. It is difficult to transport the products of electrolytic aluminum plants in the region, exacerbating the tight spot situation in the market. This week, the immediate cost of electrolytic aluminum was 18386 yuan / ton, up 0.55% month on month, and the profit per ton of aluminum was 3009 yuan, up 35.13% month on month. This week, China's eight aluminum ingot inventories totaled 949000 tons, and Zhou Du accumulated 84000 tons.

3. For zinc ingots, at present, Europe has not found enough natural gas suppliers; There is no possibility of Beixi No. 2 passing, the European energy problem is expected to continue, the output of European refineries is still difficult to recover, and the resilience of consumption is still supporting LME inventory destocking; In terms of Shanghai zinc, the accumulated social inventory in the week after the festival was lower than expected. This week, the total inventory of zinc ingots in seven places was 242700 tons, and the weekly cumulative inventory was 24800 tons.

Upstream lithium battery raw materials: the prosperity of the global new energy industry continues to rise, the electric vehicle market in China, the United States and Europe resonates, and the upward trend of upstream raw material prices continues to strengthen:

1. In January, the sales volume of electric vehicles in Europe increased year-on-year and weakened seasonally month on month: the sales volume of six European countries (Britain, France, Germany, Norway, Sweden and Italy) totaled 108600 vehicles in January, with a year-on-year increase of 27% and a month on month decrease of 47%.

2. Lithium carbonate prices accelerated upward again. 1) On the price side, the price of battery grade lithium carbonate this week increased by 1.41% compared with last week, and the price of battery grade lithium hydroxide increased by 1.31%. Pilbara expects the long-term single price of 22q1 lithium concentrate to reach 2600-3000 US dollars / ton. 2) On the supply side, due to the centralized maintenance of Chinese smelters at the end of the year, China's lithium carbonate output was 16620 tons in January, with a month on month ratio of - 5.19%; In January, the output of lithium hydroxide was 16312 tons, with a month on month ratio of - 2.75%; 3) Lithium salt inventory: lithium carbonate inventory decreased by 0.22% month on month from 4930 to 4919 tons; Lithium hydroxide inventory increased from 787 to 732 tons, down 6.99% month on month. 4) For overseas lithium resources, the resumption of production of wodgina mine was advanced to April this year.

3. With the tightening of raw materials, the price of cobalt may rise further. 1) On the price side, the quotations of MB cobalt (standard grade) and MB cobalt (alloy grade) increased by 1.02% and 0.87% month on month respectively, while China's metal cobalt and cobalt sulfate increased by 2.6% and 3.2% respectively. 2) On the supply side, the total output of cobalt at the mine end of 2021q4 of major listed companies such as Glencore, vale and Sherritt was 9456 metal tons, with a year-on-year increase of + 29% and a month on month decrease of 3%.

4. Reshaping the pattern of rare earth permanent magnet industry. 1) In the spot market, the downstream actively inquired for orders after the festival, and the quotation of praseodymium and neodymium oxide in China rose 8.7% to 1035000 yuan / ton; In terms of medium and heavy rare earths, the prices of dysprosium oxide and terbium oxide increased by 0.7% and 3.5% respectively. China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) in February, the listing price of praseodymium and neodymium oxide was 816000 yuan / ton, down 0900 yuan / ton month on month. 2) On the supply side, the output of praseodymium and neodymium oxide in China in January was 6052 tons, with a month on month increase of + 25.42% and a year-on-year increase of + 4.01%.

5. Nickel: inventory is low and nickel price rises. 1) On the price side, some enterprises have not returned to work after the festival, and the inventory of nickel raw materials in China is low. SHFE nickel closed at 173700 yuan / ton, up 1.70% month on month. 2) On the supply side, in January 2022, the actual output of ferronickel from China and Indonesia totaled 117500 tons, with a month on month increase of 6.1% and a year-on-year increase of 11.83%.

Investment suggestion: maintain the "overweight" rating of the industry

1. Base metals: China's economic work in 2022 is set to be "stable". Social finance greatly exceeded expectations in January. It is expected that the follow-up stable growth policy will be gradually introduced to support the confidence of base metal demand. However, from a global perspective, 1) changes in the structure before, during and after the epidemic of overseas economic demand, and 2) the tightening trend of overseas liquidity remains unchanged, which still suppresses the demand for base metals.

2. The upstream raw materials of new energy, such as lithium cobalt rare earth copper foil, aluminum foil and magnetic materials, are still strong in the short cycle, and the general direction of the medium and long-term three-year boom upward cycle will not change. The industrial boom is the most clear and firmly optimistic.

Core target: 1) new energy vehicle industry chain: Ganfeng Lithium Co.Ltd(002460) , Tianqi Lithium Corporation(002466) , Sinomine Resource Group Co.Ltd(002738) , Yongxing Special Materials Technology Co.Ltd(002756) , Sichuan Yahua Industrial Group Co.Ltd(002497) , Zhejiang Huayou Cobalt Co.Ltd(603799) , China Molybdenum Co.Ltd(603993) , China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) , Shenghe Resources Holding Co.Ltd(600392) , Yantai Zhenghai Magnetic Material Co.Ltd(300224) , Jl Mag Rare-Earth Co.Ltd(300748) , Earth-Panda Advanced Magnetic Material Co.Ltd(688077) , Jiangsu Dingsheng New Material Joint-Stock Co.Ltd(603876) , Nuode Investment Co.Ltd(600110) , Guangdong Jiayuan Technology Co.Ltd(688388) etc. 2) Base metal: Yunnan Aluminium Co.Ltd(000807) , Henan Shenhuo Coal&Power Co.Ltd(000933) , Tianshan Aluminum Group Co.Ltd(002532) , Sunstone Development Co.Ltd(603612) , Zijin Mining Group Company Limited(601899) , Tongling Nonferrous Metals Group Co.Ltd(000630) etc. 3) Precious metals: Shandong Gold Mining Co.Ltd(600547) , Shengda Resources Co.Ltd(000603) etc.

Risk tips: macroeconomic fluctuation, import and environmental protection policy risk, gold price fluctuation risk, lower than expected risk of new energy vehicle sales, lower than expected risk of premise assumption of supply and demand calculation, etc.

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