Attach importance to the revaluation of metal resource products and investment opportunities. Under the background that the rise in crude oil prices has accelerated the upward trend of inflation expectations, we once again remind us to pay attention to the value revaluation investment opportunity of metal resource products, that is, the valuation repair we have repeatedly suggested before. In the period of high inflation (stagflation), the profits of the industrial chain will be transferred to the resource side, and the supply constraints of non-ferrous metal resources will support the sustainable high profits of resource enterprises, which is the basis of value revaluation. The low capital expenditure in mineral exploration and development in the past 10 years is the underlying logic of strong supply constraints at the non-ferrous metal resource end in the next few years. At the same time, various major events in recent years (repeated epidemics, “double carbon” policy, Russia Ukraine conflict, energy crisis, etc.) have formed strong restrictions on the release of resource supply and extended the transformation cycle of capital expenditure, Metal prices will remain high. The US February non farm employment data far exceeded expectations, the unemployment rate continued to improve, and the labor market remained strong, which continued to provide support for the Fed’s interest rate hike. The expectation of interest rate hike has been very full. The government work report sets China’s GDP target of about 5.5% in 2022, which further strengthens the expectation of steady growth, and the investment in fixed assets is expected to make efforts to support the demand for metal resources.
The conflict continued to support the aluminum price, and the industry profit continued to expand; High inflation supports copper prices. SHFE aluminum price rose 3.3% to 23595 yuan / ton this week, and the average gross profit of the industry increased by 497 yuan and 5905 yuan / ton, basically the same as last week. According to wind data, aluminum ingots accumulated 26000 tons to 1082000 tons, and the pace of accumulation continued to slow down. The current aluminum price is still mainly affected by the geographical conflict between Russia and Ukraine. The conflict between Russia and Ukraine continues to escalate, and the European and American sanctions against Russia continue. The market is worried that the conflict between Russia and Ukraine will further tighten the supply of electrolytic aluminum. In the week, Rusal announced that it would temporarily close its alumina plant in Ukraine due to traffic problems (involving a production capacity of 1.759 million tons / year, an equity production capacity of 10.571 million tons / year of Rusal alumina, accounting for 16.7% of Ukraine’s production capacity). At the weekend, Russia stopped supplying loose natural gas to Germany through Yamal pipeline, and the price of natural gas futures in the UK rose by 27% in April, The tightening of supply and raw materials is expected to strengthen, and Lun aluminum continues to rise. In China, although the resumption of production capacity in Southwest China at the beginning of the week interfered with the aluminum price, considering that the current high rise in overseas aluminum price led to the closure of the import window, the insufficient overseas supply and the superposition of output still decreased year-on-year (according to Baichuan Yingfu, the weekly output of electrolytic aluminum was 790000 tons, down 30000 tons from the fourth week after the Spring Festival in 2021), the supply was still supported, and the demand side continued to pick up, The inflection point of aluminum rod inventory has been found. On the premise that China’s fundamentals are still supported, the industry’s profit will continue to maintain the gross profit level of 5500 yuan / ton, corresponding to the peak of gross profit in September 2021, but the continuous range is longer than 2021 and has a continuous trend. Considering that the current valuation level of electrolytic aluminum enterprises is close to the historical low, we expect that with the rise of aluminum price center, the valuation is expected to further decline, and 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 electrolytic aluminum enterprises whose valuation continues to repair under the profit reversal of the beneficiary industry. SHFE copper price rose 4.39% to 73980 yuan / ton, LME + SHFE inventory went to warehouse from 2183 tons to 143000 tons. This week, with the Fed’s interest rate increase and reduction, energy prices and inflation expectations continued to rise, bulk prices generally rose, and copper prices rose. Considering that the Fed’s interest rate increase is still cautious, there is still macro support for copper prices; In terms of fundamentals, copper inventories remained low, the demand side eased with the seasonal recovery, and the short-term macro and basic copper prices were supported.
In February, the sales volume of new energy vehicles maintained high growth. This week, the price of lithium carbonate in Wuxi increased by 3.08% to 502500 yuan / ton, the price of industrial carbon and electric carbon in Baichuan increased by 5.3%, 4.5% to 49000 yuan / ton, the price of lithium hydroxide increased by 7.1% to 451900 yuan / ton, and the price of spodumene increased by 0.2% to 2715 dollars / ton. Lithium salt is in short supply, and the price continues to rise rapidly. This week, the operating rate and output of lithium carbonate increased by 3.8% to 45.11% and 4087 tons, the operating rate and output of lithium hydroxide increased by 5.7% to 47.65% and 3509 tons, and their inventories decreased by 0.97% and 4.14% to 4899 and 741 tons respectively. Sqm released the four seasons report. The company’s lithium salt sales in 2021 were 101100 tons, of which 31000 tons were sold in Q4, with an average price of 14600 US dollars / ton. The company expects that the lithium salt sales in 2022 will increase by 38.5% to 140000 tons, of which more than 50% will adopt the floating pricing mode. In addition, the company expects that the capacity of lithium carbonate and lithium hydroxide will be increased to 180000 tons and 30000 tons respectively in 2022, and the construction of Carmen lithium salt plant in Chile will be carried out. It is expected that the capacity of lithium carbonate and lithium hydroxide will be 210000 tons and 40000 tons respectively in 2023. The global demand for new energy vehicles increased by 338.9% year-on-year from January to February, but the sales volume of new energy vehicles decreased by 51.89% year-on-year. February is the off-season of automobile sales, and most automobile enterprises have decreased month on month, but they still maintain high-speed growth year-on-year. February Byd Company Limited(002594) new energy passenger vehicle sales 87500 units, an increase of 7.64 times year on year and a decrease of 6% month on month; The sales of Nezha, Xiaopeng and Weilai new energy vehicles were 7117, 6225 and 6131 respectively, with a year-on-year increase of 255%, 180% and 9.9%, and a month on month decrease of 35.4%, 51.8% and 36.5%. As there are only 28 days in February, including the Spring Festival, which basically does not ship goods for a week, the sales volume of car enterprises is still strong according to the weekly data. Sqm believes that the global demand for lithium increased by 55% to 500000 tons year-on-year in 2021, and it is expected that the demand for lithium will increase by more than 30% year-on-year in 2022. Under the combined action of strong supply constraints and high demand growth, the high operating trend of lithium price is difficult to change, the performance of lithium resources enterprises will exceed the expected growth, and the value will face revaluation.
The upstream and downstream game continued, and the rare earth price fluctuated at a high level. At the beginning of this week, rare earth manufacturers tried to increase the price, but the inquiry orders in the middle and lower reaches of the week decreased, the high quotation was difficult to be supported by trading volume, and the prices of various products gradually fell. Light rare earth prices rose slightly by the end of the week, including praseodymium and neodymium oxide, which rose 0.46% to 1.1 million yuan / ton. Heavy rare earth manufacturers made more profits to ship, and the price decreased slightly. At present, the inventory of all links of the industrial chain is generally small. In late March, downstream enterprises may have the possibility of centralized procurement, so it is necessary to closely follow up the transaction. Rare earth prices are running at a high level, and rare earth enterprises also have valuation and repair opportunities.
Precious metals or will continue to rise. SHFE gold rose 1.89% to 398.96 yuan / g and SHFE Silver Rose 1.46% to 5145 yuan / kg. The real yield of us 10-year Treasury bonds fell 36pct to – 0.93%; SPDR’s gold position rose 28 tons to 1054 tons, slv1690000 tons, basically the same as last week. Precious metals continued to be affected by geopolitical conflicts and high inflation expectations this week. China, Russia and Ukraine held the second round of negotiations this week. Although they reached a consensus on the establishment of humanitarian channels, other aspects still need to be discussed. The two sides will conduct the next round of negotiations as soon as possible, superimposing the continuation of sanctions against Russia by European and American countries, and the uncertainty of geographical conflict still supports the price of precious metals; In terms of inflation, Powell stressed the 25bp interest rate hike in the middle of the week, and the intensity of interest rate hike slowed down, alleviating the concern of the market about the speed of interest rate hike caused by the continuous upward inflation of energy prices. It is expected that under the premise that the geopolitical conflict is difficult to ease in the short term and the rhythm of interest rate increase slows down, precious metals still have upward momentum.
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. The strong constraints on the supply of metal resources caused by long-term low capital expenditure will support the high operation of non-ferrous metal prices in the next few years. At the same time, with the upward inflation expectation and the continuous easing of China’s monetary policy, non-ferrous metal resource enterprises will usher in investment opportunities for value revaluation. Lithium suggests paying attention to Tianqi Lithium Corporation(002466) , Ganfeng Lithium Co.Ltd(002460) , Chengxin Lithium Group Co.Ltd(002240) , Sinomine Resource Group Co.Ltd(002738) , Yongxing Special Materials Technology Co.Ltd(002756) , etc; It is suggested to pay attention to Lizhong Sitong Light Alloys Group Co.Ltd(300428) , Guangdong Haomei New Materials Co.Ltd(002988) , Guangdong Hoshion Aluminium Co.Ltd(002824) , 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.
