Investment Event: on February 24, Russian President Vladimir Putin announced that the Russian army had launched a special military operation in the Donbas region. Ukrainian President Zelensky announced that the whole territory of Ukraine has entered a state of war. US President Joe Biden announced that he would work with allies to impose tougher sanctions on Russia.
Short term risk aversion, medium-term inflation compresses real interest rates and pushes up gold prices. The conflict between Russia and Ukraine deteriorated sharply and escalated into a local war. The risk appetite of the global capital market decreased. The volatility of CBOE rose by 7.67%. Risky assets such as equity were sold off and funds entered safe haven assets. Comex gold price rose by 3.42% on the same day. In the medium term, as a global energy power, Russia’s share of global crude oil and natural gas exports reached 11.3% and 16.2% respectively in 2021, accounting for 27% and 35% of EU crude oil and natural gas imports. The escalation of the conflict between Russia and Ukraine and the sanctions imposed by the United States and other countries on Russia after the war may increase the risk of the global energy crisis. NYMEX crude oil and ice oil distribution both exceeded the $100 / barrel mark, and the price of European natural gas futures rose 35% to nearly $1400 per 1000 cubic meters. Rising energy prices will push up global inflation expectations, thereby compressing real interest rates. The negative impact of the Russian Ukrainian conflict on the global economy may also affect the rhythm of the Fed’s interest rate hike. According to the observation tool of the Federal Reserve of Zhishang Institute, the market expects that the probability of the Fed’s interest rate hike of 50-75 basis points in March has decreased from 41.4% on February 22 to 13.3% after the escalation of the Russian Ukrainian conflict. The decline in the expected rate increase of the Federal Reserve may delay the rise of US Treasury bond yields, superimpose the rise of inflation expectations, and further compress the US real interest rate. The real yield of us 10-year Treasury bonds fell again from – 0.42% on February 10 to – 0.54% on February 23. The short-term risk aversion after the conflict between Russia and Ukraine and the decline of us real interest rate in the medium term may support the trend of gold price. It is suggested to pay attention to the leading enterprises in the gold sector Shandong Gold Mining Co.Ltd(600547) , Yintai Gold Co.Ltd(000975) , Shandong Humon Smelting Co.Ltd(002237) , Chifeng Jilong Gold Mining Co.Ltd(600988) .
Sanctions against Russia will disrupt the global aluminum supply chain, and aluminum prices are expected to remain strong under the risk of supply shortage. Russia is the world’s second largest producer of primary aluminum, with its own electrolytic aluminum output of more than 4 million tons. Rusal is one of the largest aluminum producers in the world. In 2021, Rusal’s primary aluminum output was 3.764 million tons, accounting for 5.6% of the total global output. Nearly 50% of the raw aluminum produced by Rusal is sold in the EU and the Americas. Once the United States and the European Union sanction Rusal, it will disturb the global aluminum supply market. In 2018, the US government sanctioned Rusal, resulting in the international aluminum price rising by more than 30% in 11 trading days, reaching a seven-year high. The European energy crisis caused by the tense situation between Russia and Ukraine has caused the electricity cost of electrolytic aluminum plants in Western Europe to rise and forced to reduce production. Up to now, the production reduction of electrolytic aluminum in Europe has reached 875000 tons, accounting for 17.5% of the completed capacity in Western Europe, which has exacerbated the global supply shortage of electrolytic aluminum and pushed up the rise of overseas aluminum prices, resulting in the decline of China’s raw aluminum import profit to – 2187 yuan / ton, and China’s electrolytic aluminum import window has been completely closed. In 2021, China imported 1.58 million tons of electrolytic aluminum. In the case of stronger overseas aluminum price and import loss this year, China’s electrolytic aluminum import supply will be missing. From the perspective of demand, the obstruction of European electrolytic aluminum production and Russian electrolytic aluminum export may cause some downstream enterprises in Europe to be forced to turn to China for electrolytic aluminum or aluminum processed products procurement, which will also benefit China’s electrolytic aluminum consumption and support the continued strong rise of China’s aluminum price from both supply and demand. It is suggested to pay attention to the electrolytic aluminum sector Yunnan Aluminium Co.Ltd(000807) , Henan Shenhuo Coal&Power Co.Ltd(000933) , Tianshan Aluminum Group Co.Ltd(002532) , Aluminum Corporation Of China Limited(601600) . In addition, Russia, a large resource country, produced 886000 tons of copper concentrate in 2021, accounting for 4.22% of the world’s total output; In 2021, the output of primary nickel is 146000 tons, accounting for about 5% of the total global output; In terms of small metals, the output of palladium and platinum in Russia accounted for 43% and 14% of the world respectively. If Russia is sanctioned, the risk of global non-ferrous metal commodity supply will increase, and the prices of nickel, copper, palladium, platinum and other metals are expected to rise.
Investment suggestion: the conflict between Russia and Ukraine escalated into a local war, the decline of risk appetite in the global capital market, short-term risk aversion, and the rise of medium-term energy prices pushed up inflation expectations, and the compression of real interest rates is expected to support the gold price. It is recommended that the leading enterprises in the gold sector Shandong Gold Mining Co.Ltd(600547) (600547), Yintai Gold Co.Ltd(000975) (000975), Shandong Humon Smelting Co.Ltd(002237) (002237), Chifeng Jilong Gold Mining Co.Ltd(600988) (600988). After the deterioration of the conflict between Russia and Ukraine, the United States and other countries may impose sanctions on Rusal, which may disrupt the global aluminum supply chain, add to the European energy crisis, force the aluminum factories in Western Europe to reduce production, exacerbate the risk of electrolytic aluminum supply shortage, and stimulate the further strong rise of aluminum price. LME aluminum price has reached a record high of $3466 / ton. It is recommended that the leading enterprises in electrolytic aluminum sector Yunnan Aluminium Co.Ltd(000807) (000807), Henan Shenhuo Coal&Power Co.Ltd(000933) (000933) Tianshan Aluminum Group Co.Ltd(002532) （002532）、 Aluminum Corporation Of China Limited(601600) （601600）。 In addition, once Russia, a large resource country, is sanctioned and the export of metal resources is limited, combined with the upward trend of energy costs, it will also benefit the prices of non-ferrous metals such as nickel, copper, zinc, palladium and platinum. It is suggested to pay attention to the relevant targets Chengtun Mining Group Co.Ltd(600711) (600711), Zhejiang Huayou Cobalt Co.Ltd(603799) (603799), Zijin Mining Group Company Limited(601899) (601899), Western Mining Co.Ltd(601168) (601168), Yunnan Chihong Zinc & Germanium Co.Ltd(600497) (600497), Shenzhen Zhongjin Lingnan Nonfemet Co.Ltd(000060) (000060) Sino-Platinum Metals Co.Ltd(600459) （600459）、 Baiyin Nonferrous Group Co.Ltd(601212) （601212）。
Risk tips: 1) the Fed’s interest rate hike process is faster than expected; 2) The risk of conflict between Russia and Ukraine decreased; 3) The downstream demand for nonferrous metals is sluggish; 4) Non ferrous metal prices fell sharply.
