Under the stable economic tone, metal demand is expected to support metal prices. Near the end of the year, the policy has set the tone for the overall economy and finance in 2022. Under the pattern of stable growth, promoting investment is expected to become the main driving force. After the continuous demand side stress test in the third to fourth quarters of 2021, the main metal products will usher in continuous marginal improvement. The category with high proportion of new energy and new infrastructure related fields in downstream applications has the most elasticity. In addition, since the second quarter of 2021, the high price of metal commodities and production constraints have led to the continuous destocking of the whole industrial chain. After the rapid correction and stabilization of metal prices in mid November, although the overall demand has not improved significantly, the demand for replenishment of inventory in the middle and lower reaches continues to support commodity prices. We expect that with the steady economic policy guidance, inventory replenishment support will transition to the recovery of real demand in the next 1-2 quarters. Overseas, the impact of Omicron variant continued to weaken, superimposed on the implementation of liquidity tightening policies in the United States and Europe, and the overall risk appetite increased, supporting the weak rebound of metal prices.
The European energy crisis continues to ferment, the profits of electrolytic aluminum continue to widen, and the copper price is repeatedly tangled, so it is difficult to find a trend direction. SHFE aluminum prices rose 1.6% to 20035 yuan / ton this week. According to wind data, the national aluminum ingot inventory continued to decline to 832000 tons, a weekly decrease of 5.1%. Russia announced restrictions on the transmission of natural gas to Europe, the “cold wave” struck, the supply of nuclear power was tight, and the sharp rise in electricity price triggered the strengthening of the expectation of electrolytic aluminum production reduction; China’s aluminum ingot inventory is still low, All localities have successively issued the “14th five year plan” for ecological and environmental protection (including the draft for comments) it is also mentioned that the limit / reduction will replace the new electrolytic aluminum production capacity in the province, and the supply side is expected to further reduce, which will support the aluminum price. On the cost side, alumina continues the downward trend, the cost of self provided electricity does not fluctuate much, and the profit of electrolytic aluminum widens to 2335 yuan / ton. It is recommended to continue to pay attention to electrolytic aluminum enterprises with reversed profit and loss. SHFE copper fluctuates narrowly this week, rising by 0.6 per week From 7% to 69750 yuan / ton, the impact of overseas Omicron epidemic and liquidity tightening eased in stages, and the supply variables in South America continued to affect the overall supply, resulting in the annual copper production in 2021 lower than the 4% growth rate expected in the previous period. The demand side is hot inside and cold outside in the short term, the epidemic in East China accelerates, and the demand drops in the off-season. It is difficult to find major inflection factors on both sides of supply and demand. We believe that the copper price will remain in a narrow range of 70000 yuan / ton.
The long-term value of lithium resources needs to be revalued. This week, the price of lithium carbonate in Wuxi increased by 3.14% to 296000 yuan / ton, the price of industrial carbon and electric carbon in Baichuan increased by 5.71%, 7.74% to 245500 yuan / ton, the price of lithium hydroxide increased by 4.44% to 211900 yuan / ton, the price of spodumene increased by 0.85% to 2375 US dollars / ton, and the lithium price maintained an accelerated upward trend. Towards the end of the year, the manufacturer increased the operating rate to deliver orders. This week, the operating rates of lithium carbonate and lithium hydroxide increased by 3.09% and 4.89% to 49.7% and 61.7% respectively; The output decreased by 2.15% and 0.91% to 4270 and 4051 tons respectively; Lithium carbonate inventory decreased by 4.56% to 5863 tons, and lithium hydroxide inventory increased by 29.52% to 408 tons, mainly due to lithium hydroxide manufacturers’ hoarding and delivery orders. The demand for terminal new energy vehicles continued to grow in the peak season. According to the preliminary statistics of evvolumes, the global sales of new energy vehicles in November reached 733900, an increase of 71% year-on-year and 17.6% month on month. The production capacity of lithium resources at the supply side was released slowly. Pilbara lowered the production guidelines for fiscal year 2022 by about 60000 tons to 400000-450000 tons, and the restart of ngungaju plant was delayed to the middle of 2022. We expect that as the peak sales season of new energy vehicles continues to heat up, coupled with the upsurge of goods preparation at the end of the year and the continuous shortage of resource supply, lithium prices will maintain an accelerated upward trend. At the same time, we expect that the supply and demand of lithium resources will continue to maintain a tight state in 2022, and lithium resource supply may become the biggest weakness in the lithium power industry chain, and lithium resource enterprises will face revaluation. It is suggested to focus on undervalued enterprises with rich lithium resources reserves and benefiting from the rise of lithium price, or enterprises with marginal growth of lithium resources.
Rare earth group integration landed, and the downstream acceptance of rare earth high prices gradually increased. This week, praseodymium and neodymium oxide decreased by 13000 / T to 839500 / T, and metal spectrum neodymium decreased by 15000 / T to 1.03 million / T. China rare earth group has been listed for a long time, and the integration of large groups is expected to be implemented. This integration is the rare earth assets of Chinalco, Minmetals and Ganzhou rare earth group, and the integration of other rare earth groups is expected to accelerate in the future. According to the data of Baichuan information, the output of Nd-Fe-B blanks in China in November was 22125 tons, a year-on-year increase of 4.8%. In the fourth quarter, as the peak season of traditional rare earth consumption, although high prices restrained some middle and low-end demand, high-end demand still maintained vigorous growth; Under the guidance of high and stable rare earth prices and compliance with policies, the acceptance and transmission capacity of the downstream cost side has been improved.
Inflation expectations rose and precious metals stopped falling and rebounded. SHFE gold rose 1% to 373.5 yuan / g, SHFE silver rose 1.5% to 4865 yuan / kg, and the real yield of us 10-year Treasury bonds fell 0.01% to -0.97%; SPDR’s gold position was 973.63 tons, down nearly 4.94 tons from the beginning of the week, and SLV’s silver position was 16700 tons, basically the same as last week. The spread of Omicron continued to expand. The first 100000 new cases in Britain in a single day once again triggered market panic. The year-on-year growth rate of PCE price index in the United States reached a new high, superimposed with the aggravation of the European energy crisis, the market inflation concerns continued to heat up, superimposed with the acceleration of the landing of taper, the short-term bad came out, and the price of precious metals stopped falling and rebounded. At present, the price of precious metals is still affected by many factors. The spread of Omicron and the rise of inflation expectations still support the price of precious metals in the short term, but we still need to continue to pay attention to the monetary policies of various countries and the rhythm of interest rate increase by the Federal Reserve.
Investment suggestion: in the context of the “double carbon” goal, pay attention to the historic investment opportunities of new energy and new materials, Focus on new energy metals (lithium cobalt nickel rare earth) with strong demand and weak supply pattern and new metal materials benefiting from industrial upgrading and domestic substitution. Lithium is recommended to pay attention to Tianqi Lithium Corporation(002466) , Ganfeng Lithium Co.Ltd(002460) , Yongxing Special Materials Technology Co.Ltd(002756) , Chengxin Lithium Group Co.Ltd(002240) ; new materials are recommended to pay attention to Guangdong Haomei New Materials Co.Ltd(002988) , Henan Liliang Diamond Co.Ltd(301071) , Guangdong Hoshion Aluminium Co.Ltd(002824) , Jiangsu Pacific Quartz Co.Ltd(603688) , Ningbo Boway Alloy Material Co.Ltd(601137) , Anhui Truchum Advanced Materials And Technology Co.Ltd(002171) ; titanium is recommended to pay attention to Baoji Titanium Industry Co.Ltd(600456) , Sichuan Anning Iron And Titanium Co.Ltd(002978) ; precious metals are recommended to pay attention to Chifeng Jilong Gold Mining Co.Ltd(600988) , Yintai Gold Co.Ltd(000975) , Sino-Platinum Metals Co.Ltd(600459) etc; For industrial metals, it is recommended 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.
Risk factors: the downstream demand fell more than expected, the supply side constraint policy turned, and China’s liquidity easing was less than expected; The United States tightened liquidity more than expected; Metal prices fell sharply.
