The performance of the first quarter exceeded expectations, and the valuation repair space may be greater. Inflation is high, and the Federal Reserve is about to enter a new round of interest rate hike cycle. Looking back on the historical interest rate hike cycle, regardless of monetary factors, most of them lead to upward inflation due to economic overheating, so as to curb demand and alleviate inflation by raising interest rates. However, the current round of commodity price rise has stronger force from the supply side (long-term low capital expenditure on the resource side, the impact of the epidemic on production activities, insufficient energy supply, etc.), and the interest rate increase can not improve the pressure of insufficient supply. On the demand side, the promotion of China's steady growth policy will form a strong support for bulk commodities, especially non-ferrous metals. It is reported that Chongqing, Ganzhou and other places began to reduce the down payment ratio of housing loans. At present, the inventories of various varieties of non-ferrous metals generally return to historical lows. We expect that the phenomenon of low inventories will continue to maintain in the next few years, and the overall metal prices will continue to maintain a high level, supporting the enterprise's performance to exceed the expected growth. Through several rounds of metal cycles in the history of resumption, we believe that at present, the non-ferrous metal sector has entered the valuation and repair stage as a whole, and the repair space is related to the performance elasticity. The repair space of sub sectors with better than expected performance in the first quarter report may be larger. It is suggested to focus on lithium, electrolytic aluminum, rare earth, copper and other sectors.
The aluminum industry has ushered in double repair of profit valuation, and copper is still dominated by shock in the short term. SHFE aluminum price closed at 22625 yuan / ton this week, basically the same as last week. The average gross profit of the industry was 5123 yuan / ton, and the gross profit continued to remain high. According to wind data, the aluminum ingot has accumulated 88000 tons to 1.04 million tons. The reduction of overseas electrolytic aluminum production capacity has led to the closure of China's aluminum ingot import window, and the pace of accumulation has gradually slowed down. Disturbed by the overseas European energy crisis and the Chinese epidemic, the supply of electrolytic aluminum is tightening, supported by the expected rise of alumina at the cost end, and the aluminum price center is expected to move up. Considering that the current average profit of the industry has basically recovered to the highest level in 2021, and the valuation level is close to the historical low, with the rise of aluminum price center, the valuation is expected to further decline. The electrolytic aluminum industry hopes to usher in the dual logic of performance improvement and valuation repair. It is suggested to pay attention to the electrolytic aluminum enterprises whose valuation continues to repair under the reversal of profit in the beneficiary industry. SHFE copper price closed at 71400 yuan / ton, basically unchanged from last week. Copper prices this week were mainly affected by the macro level. The Fed's interest rate meeting in January reiterated that the interest rate hike led to insufficient upward sentiment. Superimposed on the geopolitical impact of Europe, risk aversion increased, and copper prices were under pressure during the week. In terms of fundamentals, LME + SHFE inventory increased by 35000 tons to 144000 tons this week, which is still at a historical low. The resumption of work and production at the downstream of the demand side is affected by the epidemic and the delay of the commencement of some processing plants, the recovery pace is slow, and the short-term copper price is still expected to be dominated by shock.
The valuation and repair of lithium sector was gradually started. This week, the price of lithium carbonate in Wuxi increased by 9.02% to 471500 yuan / ton, the price of industrial carbon and electric carbon in Baichuan increased by 13.3%, 12.6% to 425500 yuan / ton, the price of lithium hydroxide increased by 15.5% to 371900 yuan / ton, the price of spodumene remained at US $2710 / ton, and the daily average price of lithium increased by 10000 yuan. On the supply side, the operating rate and output of lithium carbonate increased by 1% to 42.45% and 3846 tons respectively month on month, the inventory increased by 0.24% to 4951 tons month on month, the operating rate and output of lithium hydroxide increased by 5% to 41.49% and 3506 tons month on month, the inventory decreased by 1.92% to 765 tons month on month, the overall output increase was not obvious, while the inventory of lithium battery materials in the downstream continued to decrease, facing the pressure of replenishment. This week, ALB released its 2021q4 quarterly report. In 2021, the company's lithium salt output totaled 88000 tons, including about 60% of lithium carbonate and 40% of lithium hydroxide. The company expects the sales volume of fy2022 lithium to increase by 20% - 30%. In addition, ALB will increase the global lithium demand forecast in 2025 from the previous 1.14 million tons to 1.5 million tons of LCE. On the demand side, the production and sales of Shanxi Guoxin Energy Corporation Limited(600617) automobiles in January were 452000 and 431000 respectively, with a year-on-year increase of 1.3 and 1.4 times respectively, and a month on month decrease of 13% and 11%. January is the traditional off-season for automobile sales, and the decrease in month on month data is reasonable. The year-on-year growth rate continues the rise in 2021, and the scale of production and sales is much higher than that in the same period last year. The strong demand remains unchanged. Due to the influence of various uncontrollable factors on the production or expansion of lithium resources outside China, the shortage of lithium resources is difficult to alleviate in the short term, the supply of lithium salt is hard to find, and the price continues to rise rapidly. We expect that the performance of lithium sector companies will exceed the expected growth in 2022, which will begin to be reflected in the first quarterly report, and the valuation repair market of the sector has been gradually started.
Rare earth prices generally rose. The prices of praseodymium, neodymium, praseodymium neodymium, terbium and dysprosium oxides were 110.5, 122, 109.5, 15.10 and 3.145 million yuan / ton respectively, with weekly increases of 6.76%, 7.49%, 5.80%, 3.42% and 0.96% respectively. According to SMM research, affected by the epidemic situation in Myanmar, the imported ore continues to be tight. At the same time, the inventory of Nd-Fe-B waste enterprises is basically cleared before the festival. It is difficult to replenish the new inventory in February. The tightening of the supply end of imported ore and Nd-Fe-B waste makes the upstream supply of rare earth in China continue to be tight. On the demand side, the improvement of energy efficiency of new energy vehicles, wind power and industrial motors has become the main driving force of the demand for rare earth permanent magnets. The optimization of supply side and the pull of end consumer demand supported the rise of rare earth prices.
High inflation and geopolitics support precious metal prices. SHFE gold rose 3.3% to 387.5 yuan / g, SHFE silver rose 3.5% to 4916 yuan / kg, and the real yield of us 10-year Treasury bonds rose 2pct to - 0.49%; SPDR's gold position increased by 5 tons to 1024 tons, and SLV's silver position increased by 107 tons to 17000 tons. Precious metal prices this week were mainly affected by high inflation expectations and geopolitical conflicts. The minutes of the Federal Reserve's interest rate meeting in January were released, reiterating the urgency of raising interest rates under high inflation, but the statement was not more hawkish. Since the market had fully digested the expectation of raising interest rates, precious metals continued to rise under the expectation of high inflation, coupled with the continuous escalation of the events in China, Russia and Ukraine this week, risk aversion boosted the rise of precious metal prices, and precious metal prices are still supported in the short term.
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 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 will welcome the valuation repair of the non-ferrous sector. Lithium suggests paying attention to Tianqi Lithium Corporation(002466) , Ganfeng Lithium Co.Ltd(002460) , Sinomine Resource Group Co.Ltd(002738) , Yongxing Special Materials Technology Co.Ltd(002756) , Chengxin Lithium Group Co.Ltd(002240) ; It is suggested to pay attention to Guangdong Haomei New Materials Co.Ltd(002988) , Guangdong Hoshion Aluminium Co.Ltd(002824) , Lizhong Sitong Light Alloys Group Co.Ltd(300428) , 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) , 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.
