Geopolitical conflicts and rising inflation have strengthened the binding force of metal supply. The conflict between Russia and Ukraine has escalated, and the risk aversion has driven up the prices of gold and crude oil, and the inflation has heated up again. At the same time, it has a far-reaching impact on the supply side of non-ferrous metals and other bulk commodities. On the one hand, the tight supply of natural gas in Europe may escalate under the influence of geopolitical crisis, superimposed with the rise of crude oil price, limited non-ferrous metal production and rising energy and transportation costs; On the other hand, the sanctions imposed by western countries on Russia may affect the production and sales of aluminum, copper and other metals. Overall, against the background of geopolitical conflict and large inflation, gold is supported by the demand for asset preservation and risk aversion, industrial metals, especially electrolytic aluminum, are supported by supply side disturbance, and low inventory and high premium are expected to continue.
Geopolitical conflicts supported aluminum prices and copper inventories remained low. SHFE aluminum price closed at 22600 yuan / ton this week, basically the same as last week. The average gross profit of the industry increased by 285 yuan / ton to 5408 yuan / ton. According to wind data, aluminum ingots accumulated 52000 tons to 1056000 tons, and the pace of accumulation continued to slow down. Affected by the geopolitical conflict between Russia and Ukraine this week, the aluminum price rose to 23265 yuan / ton, and the Russian Ukrainian incident continued to escalate. Russia’s entry into Ukraine exceeded expectations, leading to the announcement of sanctions against Russia by European and American countries. Considering Rusal as the largest overseas electrolytic aluminum enterprise (electrolytic aluminum equity production capacity of 3.765 million tons / year, accounting for 4.9% in the world, alumina equity production capacity of 10.571 million tons / year, accounting for 7.6% in the world), The market is worried that the conflict between Russia and Ukraine will further tighten the supply of electrolytic aluminum, and the tightening of supply is expected to support the rise of aluminum price. From the perspective of industry profit, the current average profit of the industry has basically recovered to the highest level in 2021, but the valuation level is close to the historical low. We expect that with the rise of aluminum price center, the valuation is expected to further decline. The electrolytic aluminum industry is expected 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 of the beneficiary industry. SHFE copper price fell 1.4% to 70860 yuan / ton, and LME + SHFE inventory was 146000 tons, basically the same as last week, still at a historical low. This week, copper prices are mainly affected by geographical conflicts and fundamentals. The conflict between Russia and Ukraine continues to escalate, and the pace of interest rate hike by the Federal Reserve may slow down, forming a certain support for copper prices. In terms of fundamentals, the current copper inventory is still at a historically low level, but the downstream demand is weak. The insufficient willingness of northern processing enterprises to start work leads to weaker demand. It is expected that the short-term copper price will still fluctuate around 70000 yuan / ton.
Q1 performance of lithium sector may generally exceed expectations. This week, the price of lithium carbonate in Wuxi increased by 3.39% to 487500 yuan / ton, the price of industrial carbon and electric carbon in Baichuan increased by 9.4%, 9.0% to 465500 yuan / ton, the price of lithium hydroxide increased by 13.4% to 421900 yuan / ton, and the price of spodumene remained at US $2710 / ton. Lithium salt is in short supply, and the price has accelerated. Under the influence of excessive price difference, lithium hydroxide has increased even more. This week, the operating rates of lithium carbonate and lithium hydroxide increased by 2.43% and 8.68% to 43.48% and 45.09% respectively; The output increased by 2.42% and 8.67% to 3939 and 3321 tons respectively. The sharp increase in the output of lithium hydroxide caused a slight increase in inventory by 1.05% to 773 tons, and the inventory of lithium carbonate continued to decline. Pilbara sold 170000 tons of lithium concentrate in the second half of 2021. The company expects that the capacity of lithium concentrate will be increased from 330000 tons / year to 560000 ~ 580000 tons / year, including 30000 ~ 50000 tons of capacity increased by the technical transformation of pilgan plant and 180000 ~ 200000 tons of capacity increased by the restart of ngungaju plant. The overall progress is still low. It is expected that the shortage of lithium concentrate supply is difficult to be alleviated in the short term. The demand is still strong. EV volumes predicts that the global sales of new energy vehicles will increase by 55% to 10.5 million in 2022. In the first quarter, the price of lithium salt accelerated, while the price of lithium concentrate lagged behind due to long single reasons, and the profit margin of lithium salt enterprises expanded. Sichuan Yahua Industrial Group Co.Ltd(002497) released the performance forecast of the first quarter report. It is expected that the net profit attributable to the parent company in 2022q1 will be 900 ~ 1.2 billion yuan, far exceeding the market expectation. We expect that the performance of lithium sector enterprises in the first quarter will generally exceed expectations, supporting the continuous valuation repair of the sector.
Rare earth upstream and downstream game, prices rose and fell. This week, the price of praseodymium and neodymium oxide rose by 1.38% to 1.1 million yuan / ton, and the price of metal praseodymium and neodymium rose by 0.74% to 1.37 million yuan / ton. The price of rare earth dropped after rising, mainly due to the above adjustment of the quotation of rare earth manufacturers. However, in the high shock stage, coupled with the Baotou epidemic, the downstream worried about the limited transportation, the psychological trend was cautious and the order receiving was not smooth, and the market entered the stalemate between low price inquiry and stable shipment. At present, the production schedule of upstream production enterprises is normal under the support of orders, and the future market needs to pay close attention to the downstream transaction.
Precious metal prices are still supported by high inflation and geographical conflicts. SHFE gold and SHFE silver closed at 384.9 yuan / g and 4903 yuan / kg, basically the same as last week. During the golden week, they rose above 400 yuan / g, a new high since January 2021, and silver rose above 5200 yuan / kg, a new high since November 2021. The real yield of us 10-year Treasury bonds fell 8pct to – 0.57%; SPDR’s gold position increased by 2 tons to 1026 tons, and SLV’s silver position decreased by 161 tons to 16900 tons. Precious metal prices this week were mainly affected by geopolitical conflicts. The Russian Ukrainian incident continued to escalate. Russia entered Ukraine more than expected. Risk aversion continued to push up the price of precious metals, and the price of gold and silver reached a high since the end of 2021. Over the weekend, the US January PCE price index rose 6.1% year-on-year than expected, superimposed on Powell’s reiteration of raising interest rates as soon as possible to curb inflation. At the same time, considering that the current precious metal price may have been pricein the conflict between Russia and Ukraine, the Fed’s expectation of raising interest rates suppressed precious metals, and the price of gold and silver fell within the week. Although the fed once again stressed the interest rate hike, considering the impact of geographical conflicts and the too fast pace of interest rate hike on economic growth, it is expected that the Fed will appropriately adjust the pace of interest rate hike in the medium and short term, and precious metal prices are still supported by high inflation and geographical conflicts.
Investment suggestion: under the background of “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) , etc; 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; For industrial 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.
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.
