China’s economy continues to repair and the global energy shortage continues to ferment. In December, China’s PMI value was 50.3%, which confirmed the recovery trend for two consecutive months, and the effect of monetary easing policy appeared. The production side recovered after the suppression factors were lifted, while the consumer side’s confidence increased rapidly, and the decline in real estate and automobile sales will continue to narrow. Despite the impact of local epidemic, the policy force is moderately advanced. Under the expectation, the market has strengthened its more positive expectation of fiscal and monetary policies, pushing the ten-year Treasury bond yield to break through 2.8%, a new low since June 2020. Overseas, the U.S. employment data was better than expected, and the impact of new variants of covid-19 epidemic weakened. However, energy issues continue to ferment and spread around the world. After the sharp rise in electricity price caused by the shortage of natural gas supply in Europe, Indonesia banned coal export in January 2022 due to China’s coal production problems and low coal inventory of power plants; As the largest source of China’s coal imports in 2021, Indonesia’s ban on exports may seriously disturb China’s coal supply and metal pricing.
The supply side support is strong, and the profit space of aluminum continues to expand; The copper market is running smoothly. SHFE aluminum price rose 1.7% to 20380 yuan / ton. According to wind data, the national aluminum ingot inventory continued the downward trend, and the social inventory of electrolytic aluminum decreased by 7.7% to 768000 tons. The European energy crisis continued to ferment, the inventory continued to operate at a low level and maintained de stocking, and the aluminum price continued its upward trend. The European energy crisis continues to ferment. According to Bloomberg data, electricity prices in Germany, France, Spain and other European countries increased by nearly 200% in 2021. The sharp rise in production costs led to a significant reduction in profit space. Manufacturers reduced losses by reducing production, Alcoa and hydro respectively announced that their European electrolytic aluminum production capacity would be reduced (Alcoa’s production would be reduced by about 228000 tons / year, and Hydro’s production would be reduced by about 90000 tons / year). In 2022, the power consumption situation of large industries in Europe may become more severe, and the production reduction caused by rising costs is expected to continue to strengthen; At present, China’s aluminum ingot inventory is still low and maintained to be removed from the warehouse. With the superposition of local carbon emission reduction policies, the supply side still forms a strong support for aluminum prices. On the cost side, the alumina price was relatively stable last week, and the cost of self provided electricity in the industry decreased slightly. The industry profit expanded to 2649 yuan / ton with the rise of aluminum price and the decline of cost side. It is recommended to continue to pay attention to the electrolytic aluminum enterprises with early losses and reversed profits. SHFE copper rose 0.85% to 70380 yuan / ton last week. At the end of the year, the copper market operated smoothly, and the stock of the exchange continued to decline, supporting the strong performance of copper price. In the first quarter of 2022, TC / RC of China’s major copper smelters was set at 70 US dollars / ton and 70 US cents / pound, an increase of 32% year-on-year and flat month on month, indicating that copper supply has improved significantly. However, China’s demand weakened when it was above 70000 yuan / ton, and the operating rate of smelters decreased due to the sharp decline of sulfuric acid price. We believe that the copper market will still operate smoothly in the off-season, and the copper price will maintain a narrow range of 70000 yuan / ton.
Lithium carbonate operating rate fell sharply. Last week, the price of lithium carbonate in Wuxi increased by 24.16% to 367500 yuan / ton, the price of industrial carbon and electric carbon in Baichuan increased by 7.1%, 9.7% to 257500 yuan / ton, the price of lithium hydroxide increased by 8.5% to 229900 yuan / ton, the price of spodumene increased by 5.5% to US $2505 / ton, and the price of lithium maintained an accelerated upward trend. Near the end of the year, some manufacturers entered the shutdown and maintenance stage, and the output continued to shrink. Last week, the operating rates of lithium carbonate and lithium hydroxide decreased by 15.75% and 6.53% to 41.90% and 57.69% month on month respectively, and the output decreased by 11.23% and 1.06% to 3796 and 4008 tons month on month respectively. The market circulation spot is limited, and the inventory continues to be removed. The inventory of lithium carbonate decreased by 5.63% month on month to 5533 tons. According to the newly released new energy vehicle policy, the framework and threshold requirements of the current purchase subsidy technical index system will remain unchanged in 2022, and the subsidy scale will be liberalized from the originally expected maximum subsidy scale of 2 million units, so as to realize the subsidy throughout 2022. Although the Chinese market has entered the stage of natural growth, However, the subsidy can alleviate the cost pressure caused by the rise of lithium price to a certain extent. It is expected that the sales of new energy vehicles in China will exceed 6 million in 2022. The high prosperity of the industry has accelerated the expansion of lithium salt plants, cathode material plants, battery plants and other midstream links. The construction cycle of lithium salt plants and cathode material plants is about 1-2 years, while the expansion cycle of lithium resources often takes 3-5 years, and the green space project takes more than 5 years. Different construction cycles make it difficult to effectively alleviate the mismatch between supply and demand of lithium resources in the next few years, 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 and magnetic materials regain their upward trend. Last week, neodymium oxide rose 15000 / ton to a new high of 930000 / ton, and neodymium iron boron blank rose 5000 / ton. At the end of the year, the overall market trading was light, but a new round of rise was brewing. There are few signs of improvement at the upstream mine end, and the inventory of the whole rare earth oxide industry chain is low; After new year’s day, the downstream demand for goods preparation is strong. We expect that the price of rare earth will continue to rise and the ability to transmit costs to the downstream will be improved. In addition, Beijing Zhong Ke San Huan High-Tech Co.Ltd(000970) announced the annual performance expectation for 2021. The performance increased significantly. In addition to the improvement of management level and operation efficiency, it also benefited from the excellent order quality and cost transmission ability of leading manufacturers.
Under the influence of multiple factors, precious metals still need to wait and see. SHFE gold rose 0.3% to 374.7 yuan / g, SHFE silver rose 0.3% to 4880 yuan / kg, and the real yield of us 10-year Treasury bonds fell 0.09% to – 1.06%; SPDR’s gold position was 975.66 tons, up nearly 2 tons compared with the beginning of the week, and SLV’s silver position was 16500 tons, down 200 tons. The number of us weekly initial jobless claims fell to 198000, lower than expected, and the price of precious metals rose instead of falling, indicating that the market has gradually changed from transactional employment to transactional inflation. Considering that after the accelerated landing of taper, the pace of interest rate increase by the Federal Reserve may be accelerated, but the space is limited, and the short-term pressure on precious metals is weak. At the same time, considering the impact of Omicron, the uncertainty still supports the price of precious metals, but the grasp of precious metal prices still needs to continue to pay attention to the monetary policies of various countries and the pace of interest rate increase by the Federal Reserve.
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 (lithium cobalt nickel rare earth) with strong demand and weak supply pattern and new metal materials benefiting from industrial upgrading and domestic substitution. Lithium suggests paying attention to Tianqi Lithium Corporation(002466) , Ganfeng Lithium Co.Ltd(002460) , 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) , 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) etc. for new materials; Titanium suggests paying attention to Baoji Titanium Industry Co.Ltd(600456) , Sichuan Anning Iron And Titanium Co.Ltd(002978) ; It is suggested to pay attention to Chifeng Jilong Gold Mining Co.Ltd(600988) , Yintai Gold Co.Ltd(000975) , Sino-Platinum Metals Co.Ltd(600459) etc. for precious metals; 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.
