Lithium nickel prices hit a new high, and it is suggested to focus on downstream demand. During the week, lithium and nickel rose sharply, the price of lithium carbonate was close to 500000, and the price of nickel broke through the $30000 mark again since 2011. The rising price of raw materials has greatly affected downstream battery factories and cathode material enterprises. Many car companies have begun to stop production of A0 models and focus on hybrid.
The Ministry of industry and information technology aims to stabilize prices. On February 28, Xin Guobin, Vice Minister of the Ministry of industry and information technology, said that this year, we will focus on meeting the production needs of power batteries, moderately accelerate the development progress of China’s lithium, nickel and other resources, and crack down on unfair competition such as hoarding and raising prices. On the one hand, stabilizing the price can cash in the profits of the upstream lithium plant, on the other hand, stabilize the downstream production and maintain demand, which is actually beneficial to each link of the industry. Considering that the inflection point of lithium supply and demand has not arrived and the supply is likely to be tight this year, we believe that the lithium battery sector should pay more attention to the sustainability of demand.
The situation in Russia and Ukraine continued to be tense, and electricity prices in Europe soared, pushing up metal costs. European natural gas futures continued to soar during the week, with the price exceeding 203 euros / MWh. The continuous price rise of natural gas drives the continuous rise of electricity price in Europe, which corresponds to the serious loss of aluminum and zinc production in Europe. According to our calculation, the loss of zinc smelting in Europe is 800 US dollars / ton, and the profit margin is about – 22%.
Aluminum: demand + high cost, aluminum price fluctuates at a high level. Fundamentals: according to SMM statistics, China’s electrolytic aluminum social inventory has accumulated from 21000 tons to 1.12 million tons, and the aluminum rod inventory has gone to the warehouse for three consecutive weeks. The downstream operating rate is 69.8%, with a month on month increase of 1.7pct. China’s consumption is relatively strong. The resumption of production of China’s electrolytic aluminum enterprises has made steady progress, but the total output is still lower than that of the same period last year. Due to the high cost caused by the high overseas electricity price, the production of European aluminum plants is gradually reduced, and the aluminum price is expected to have a strong support. China’s electrolytic aluminum smelting profits are rising, which is good for China’s electrolytic aluminum production enterprises and enterprises using recycled aluminum production, such as Lizhong Sitong Light Alloys Group Co.Ltd(300428) and so on.
Copper: the Fed’s interest rate hike is approaching, and China’s consumption continues to be depressed. During the week, US Federal Reserve Chairman Powell supported raising interest rates by 25bp at the March meeting, and US sanctions against Russia also made the macro environment more fragile. In terms of China’s consumption, according to SMM statistics, the operating rate of refined copper poles during the week was 61.96%, an increase of 3.61pct month on month. At present, the power grid investment mainly prefers UHV, and the orders are concentrated in aluminum cables, while the orders of copper cables are not ideal.
Focus on: Sinomine Resource Group Co.Ltd(002738) , China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) , Lizhong Sitong Light Alloys Group Co.Ltd(300428) , Tianqi Lithium Corporation(002466) .
Risk tip: the macro environment changes, the demand is lower than expected, and the policy uncertainty increases.
