The short-term disturbance does not change the periodic law, and the revaluation of resource value will continue. In February, the growth rate of social financing and credit was lower than expected, and the expectation of steady growth policy was further strengthened. The economy is underpinned by policies. Similarly, metal prices are supported by low inventories. At present, the conflict between Russia and Ukraine has led to the turbulence of the international situation, the superposition of repeated epidemics, the suppression of metal supply and demand at the same time, and the low inventory situation is difficult to improve in the short term. Moreover, the current complex global situation may affect the progress and intensity of capital expenditure on metal resources, which also supports the long-term high maintenance of the metal price center. The short-term extreme disturbance factors occur frequently, and the metal price fluctuates sharply, but the periodic operation law will not be reversed. We believe that the general trend of high metal price operation will not change, and the revaluation (valuation repair) of enterprise value of metal resources will continue. At the same time, the demand for hedging and hedging of precious metal assets continued to increase.
The upward trend of aluminum price is still supported, and the short-term copper price is still supported by high inflation. SHFE aluminum price fell 6.9% to 21950 yuan / ton this week, and the average gross profit of the industry fell to 4842 yuan / ton due to the fluctuation of aluminum price in the middle of the week. According to wind data, aluminum ingots accumulated 21000 tons to 1109000 tons, and the accumulation pace continued to slow down. At present, the conflict between Russia and Ukraine is still the main factor affecting aluminum prices. Affected by the commodity market shock in the middle of the week, combined with the reduction of production capacity in the early stage of China’s electrolytic aluminum and the acceleration of resumption of production, the commencement of some downstream projects was suppressed by aluminum prices, the growth rate slowed down, and the lack of confidence in multi investment led to the shock and decline of Shanghai aluminum. Considering the continuation of the current tension between Russia and Ukraine, it is expected that overseas electrolytic aluminum will continue to be affected by the European energy crisis, while overseas alumina is expected to be tightened by the conflict between Russia and Ukraine, and there is still upward momentum for Lun aluminum. At present, there is still a large price difference between China’s electrolytic aluminum and alumina and overseas commodities and there is a trend of further expansion. At present, the Shanghai Lun ratio is 6.25, the lowest since 2018; The price difference of alumina outside China has expanded to 200 yuan / ton (China’s price refers to Antaike spot index), which has reached a high since 2019. It is expected that with the further expansion of the price difference of commodities at home and abroad, the import window will continue to close, and the further expansion of the overseas supply and demand gap will stimulate the export of electrolytic aluminum and raw materials in China, and the upward trend of commodity prices is still supported, It is suggested that electrolytic aluminum enterprises that pay attention to the integration of industrial chain. SHFE copper price fell 0.7% to 72370 yuan / ton, LME + SHFE inventory went to 4857 to 208600 tons. This week’s copper price was mainly affected by the conflict between Russia and Ukraine and the macro aspect. The continuation of the conflict between Russia and Ukraine in the week led to the rise of crude oil price and the rise of copper price. Later, with the impact of the Federal Reserve’s interest rate hike and commodity market shocks, the price fell. It is expected that the short-term copper price will still be supported by high inflation, but the fundamentals may fluctuate due to the release of supply side and the slowdown of demand side.
The shortage of resources continues to suppress the operating rate of lithium salt plant. This week, the price of lithium carbonate in Wuxi fell by 1.99% to 492500 yuan / ton, the price of industrial carbon and electric carbon in Baichuan increased by 1.5%, 2.0% to 497500 yuan / ton, the price of lithium hydroxide increased by 6.6% to 481900 yuan / ton, and the price of spodumene increased by 0.7% to 2735 dollars / ton. The price difference between lithium hydroxide and lithium carbonate gradually narrowed. Lithium salt supply decreased slightly this week, mainly due to the limited supply of spodumene raw materials in Australia. The operating rate and output of lithium carbonate decreased by 0.27% to 44.99% and 4076 tons, the operating rate and output of lithium hydroxide decreased by 1.3% to 47.04% and 3465 tons, and their inventories decreased by 1.20% and 1.75% to 4840 and 728 tons respectively. On the demand side, according to the China Automobile Association, the production and sales of Shanxi Guoxin Energy Corporation Limited(600617) vehicles in mid February 2022 were 368000 and 334000 respectively, with a year-on-year increase of 198% and 205% respectively, and a month on month decrease of 19% and 23% respectively, continuing to maintain the high-speed growth trend. According to the battery industry innovation alliance, in February, the output and installed capacity of China Shipbuilding Industry Group Power Co.Ltd(600482) batteries reached 31.77 GWH and 13.67 GWH respectively, up 236.2% and 145.1% year-on-year respectively, and differentiated month on month. The output increased by 7.1% month on month, while the installed capacity decreased by 15.5% month on month. The rise of production and the fall of installation occur. First, due to the overall impact of production and sales days and Spring Festival holidays in February, there is usually a double decline in production and installation month on month, so the sharp decline in installed capacity this month is a normal phenomenon; Second, the annual installed capacity of batteries and the production and sales of new energy vehicles reached record highs in 2021, which raised the annual demand expectation of the terminal market to a certain extent. This increase in output does not rule out the possibility of reserve inventory of some terminal enterprises. In terms of output breakdown, the output of ternary battery and lithium iron phosphate battery were 11.64gwh and 20.05gwh respectively, with a month on month increase of 8% and 7% respectively. Lithium iron phosphate formed a suppression of ternary battery with a 63% proportion, which was beneficial to the demand for lithium carbonate. 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 enterprise value will face revaluation.
Rare earth prices fell slightly this week. Praseodymium and neodymium oxide decreased by 3.62% to 1.065 million yuan / ton, and metal praseodymium and neodymium decreased by 3.62% to 1.33 million yuan / ton. Affected by the mood of buying up or not buying down, the market transaction heat has cooled significantly. However, at present, the upstream and downstream still maintain normal operation. In terms of supply, due to the severe impact of the epidemic situation outside China, the customs clearance time of Myanmar ports has been delayed; The rainy season in southern plum is coming, the minerals in Jiangxi have not been fully started, and the oxide supply gap still exists. Recently, the General Administration of Customs of China released import and export data from January to February 2022, including 7835 tons of rare earth exports, a year-on-year increase of 10.8%; The average export price increased by 46.8% year-on-year. In February, the purchasing and inventory of magnetic materials enterprises have not been fully consumed, and the market wait-and-see sentiment is expected to continue.
Precious metal prices are still supported. SHFE gold rose 2.65% to 405.1 yuan / g and SHFE Silver Rose 1.82% to 5154 yuan / kg. The real yield of us 10-year Treasury bonds fell 1PCT to – 0.94%; SPDR’s gold position increased by 10 tons to 1064 tons, and SLV’s silver position was 16900 tons, basically the same as last week. At present, geopolitical conflicts and high inflation expectations are still the main drivers of precious metal prices. The continuation of the conflict between Russia and Ukraine still supports the price of precious metals, but the rise in energy prices caused by the ongoing conflict between the two sides and the consequent inflationary pressure may be the main driving force of the current price of precious metals. The US CPI rose 7.9% year-on-year in February, a new high in 40 years. The Federal Reserve decided to raise interest rates by 25bp, which once again broke the expectation of raising the rate of interest rate due to the high crude oil price. It is expected that the short-term inflationary pressure will be difficult to ease, and the price of precious metals will still be supported.
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 Poco Holding Co.Ltd(300811) , 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; ; 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.
