Focus on leading enterprises of metal resources with undervalued value. The central bank disclosed that social finance increased by 4.65 trillion yuan in March, an increase of 1273.8 billion yuan year-on-year, exceeding market expectations, reflecting the gradual implementation of steady growth projects and boosting the financing demand in the field of infrastructure. However, exports increased by 14.7% year-on-year in March, slightly lower than 16.3% from January to February. The decline in exports increased the pressure on economic growth, superimposed the epidemic to curb the recovery of consumption, and the market placed high hopes on the stable growth policy. In addition, the central bank announced that it would cut the deposit reserve ratio of financial institutions by 0.25 points on April 25, and the easing policy continued to support the bottom. We believe that under the background of stable growth policy and high inflation expectation, the metal resources sector will continue to benefit, and the high operation of metal prices and the substantial growth of enterprise performance will continue to promote the valuation repair of resource leading enterprises.
Demand is expected to recover and electrolytic aluminum enterprises will continue to benefit. SHFE aluminum price fell 0.3% to 21755 yuan / ton, and the industry average gross profit was 4120 yuan / ton, basically the same as last week. According to wind data, aluminum ingot inventory increased by 16000 tons to 1039000 tons. This week, the aluminum price is still mainly disturbed by the epidemic, which leads to poor logistics and transportation, the decline of enterprise aluminum ingot delivery volume leads to the continuation of accumulated warehouse, the superposition of strict control of epidemic prevention in East China, the production rhythm of some automobile enterprises is disrupted, the arrival of raw materials and product delivery are less than expected, the market expectation is pessimistic, and the aluminum price fluctuated and fell at the beginning of the week. Over the weekend, with the announcement of the social clearing of epidemic prevention in Jilin and the initial emergence of the inflection point of the epidemic in Shanghai, the market sentiment eased and the aluminum price rebounded rapidly. In the short term, after the social clearance of Jilin, the automobile industry took the lead in resuming production; In view of the epidemic situation in Shanghai, the Ministry of industry and information technology proposed many measures to ensure the supply chain and stable production of key enterprises in Shanghai, and the Shanghai Economic and Information Technology Commission timely issued epidemic prevention guidelines for the resumption of work and production of industrial enterprises. It is expected that the downstream demand for electrolytic aluminum will accelerate the recovery and form a strong support for aluminum prices. In terms of industry profits, some electrolytic aluminum enterprises released the performance forecast for the first quarter in the middle of the week, and the enterprise profits increased significantly year-on-year, indicating that the industry profit level increased significantly. It is expected that with the recovery of downstream demand, the rebound of aluminum price will continue to drive the industry profits wider, electrolytic aluminum enterprises will continue to benefit, at the same time, the price difference of aluminum at home and abroad continues, and the proportion of export products is relatively large, and aluminum alloy processing enterprises will continue to benefit. SHFE copper price rose by 1.5% to 74880 yuan / ton, lme+shfe inventory accumulated 14000 tons to 231000 tons. The current copper price is still disturbed by the fundamentals and macro aspects, the strict control policy on the epidemic situation in processing areas continues, the slow arrival of raw materials by enterprises and the lack of downstream orders lead to the slowing down of the demand side, and the macroeconomic expectation of sluggish growth or even recession in the United States is becoming stronger. The financial attribute will continue to support the strong operation of copper price by adding China’s reserve requirement reduction of 25bp.
The spot price of lithium carbonate fell 7%. This week, the price of lithium carbonate in Wuxi fell by 1.03% to 434500 yuan / ton, Baichuan electric carbon and industrial carbon fell by 7.2%, 6.5% to 480400 yuan / ton and 465000 yuan / ton respectively, the price of spodumene rose by 1.8% to US $2825 / ton, and the price of lithium hydroxide rose by 3.0% to 508900 yuan / ton. Under the influence of the epidemic, the price of lithium carbonate is under pressure. The supply of lithium carbonate and lithium hydroxide increased this week. The operating rates of the two increased by 1.03 and 1.58 percentage points to 46.26% and 49.57% respectively, and the output increased by 1.04% and 2.03% to 4280 and 4365 tons respectively. The inventory of the two increased by 0.45% and 26.40% to 4942 and 1489 tons respectively month on month, while the inventory of downstream ternary materials and lithium iron phosphate decreased, reflecting the accelerated consumption of downstream inventory but weak procurement of raw materials. On the demand side, the sales volume of new energy vehicles in the first quarter was still strong supported by deferred orders. According to the China Automobile Association, the production and sales volume of new energy vehicles in China in March were 465000 and 484000 respectively, up 26% and 45% month on month; In the first quarter, the production and sales volume were 1285300 and 1074900 respectively, with a year-on-year increase of 141% and 143% respectively. The first and second quarters are the off-season of traditional consumption. The recent widespread epidemic has had an impact on the new energy industry chain. Vehicle manufacturers are facing the difficulty of insufficient parts. The vehicle factory of Changchun base of FAW Group took the lead in stopping production on March 13; Tesla‘s Shanghai plant announced shutdown twice in succession in March 2022, and there is no estimate of the time for resumption of production; Wei Lai said that since March, due to the epidemic, the company’s supply chain partners in Jilin, Shanghai, Jiangsu and other places have stopped production one after another, and have not yet recovered. Under the influence of the epidemic, the demand for lithium downstream has been restrained for a short time, which is the main factor for the rapid reduction of lithium price. At the same time, the reduction of procurement by downstream industries, mainly digestion of inventory, also affects the demand for lithium. According to the power battery industry innovation alliance, China’s power battery output in the first quarter was 100.6gwh and the installed capacity was 51.3gwh, of which ternary battery and lithium iron phosphate battery accounted for 41.6% and 58.2% respectively. The large difference between output and installed capacity reflects that the inventory in the downstream is sufficient in the short term. We believe that in the second quarter, the short-term weakness of the demand side and the gradual increase of the marginal increment of the supply side have ushered in a rare correction window period for lithium salt prices. However, the price of lithium concentrate is still in an upward trend, forming a strong support for lithium salt prices in terms of cost. At the same time, the third quarter has entered the peak consumption season of new energy vehicles. The time and space for lithium price correction are limited, and the overall operation will remain high, The correction and stabilization of lithium price is more conducive to the valuation repair of relevant companies in the lithium sector.
The spread of the epidemic has led to a decline in demand, and rare earth prices continue to fall. On April 9, China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) official website announced that the listing price of rare earth products in April 2022 was the same as that in March, and the listing price of praseodymium and neodymium products was lower than the market price (the listing prices of praseodymium and neodymium oxide and metal praseodymium and neodymium were 816000 yuan / ton and 994500 yuan / ton respectively, and the prices quoted by Baichuan Yingfu on April 9 were 895000 yuan and 1090000 yuan / ton respectively). The price of praseodymium and neodymium oxide fell 8.38% to 820000 yuan / ton this week, The metal praseodymium and neodymium fell 7.34% to 1.01 million yuan / ton, gradually approaching the China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) quotation. Affected by the epidemic situation in the Yangtze River Delta and the Pearl River Delta, the demand for orders of new energy vehicles and electric two wheeled vehicles in the downstream decreased in April. Tesla, Weilai and FAW all stopped production, which may affect the orders of motors and magnetic materials in the second quarter. The demand weakened, and the price of rare earth may continue to decline.
Precious metal prices are still supported by risk aversion and stagflation expectations. SHFE gold rose 2.6% to 406.4 yuan / g and SHFE silver rose 5.2% to 5292 yuan / kg; The real yield of us 10-year Treasury bonds rose 9pct to – 0.06%; SPDR’s gold position increased by 9 tons to 1099 tons, and SLV’s silver position was 17700 tons, basically the same as last week. This week, precious metal prices are still supported by risk aversion, stagflation of inflation and even the US economic recession. The U.S. Congress agreed to cancel normal trade relations with Russia, adding to the fact that Ukrainian armed helicopters attacked Russian homes, resulting in a renewed rise in risk aversion. The CPI and PPI of the United States recorded a record increase in March, and the pace of interest rate hike accelerated and the expectation became stronger. However, the interest rate of U.S. short-term treasury bonds retreated partially and the real disposable income of residents continued to decline in February, suggesting that the growth rate of the U.S. economy may slow down and support the expectation of market stagflation, Precious metal prices continue to rise, and it is expected that short-term precious metal prices will still be supported by risk aversion and stagflation expectations.
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; 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, etc
