China’s in-depth emphasis on steady growth and the Fed’s tightening progress exceeded expectations. In early January, China’s top leaders further emphasized the policy of stabilizing growth and the security of energy supply. The policy orientation of steady growth is expected to promote the easing and elimination of metal supply side constraints, promote the recovery of downstream manufacturing demand, and accelerate the transition of metal price logic from supply side to demand side. Since December 2021, the positive policies of real estate have been implemented rapidly. In addition, the expansion of infrastructure investment has become the main focus of steady growth. The metal varieties with high demand in the construction industry are expected to continue to maintain a strong trend. Overseas, the FOMC meeting minutes released on January 6 show that the Fed’s tightening speed may exceed expectations, and the detailed schedule reduction plan will be implemented soon. After World War II, the fed only implemented the schedule reduction in 2017; The bond market is expected to raise the number of interest rate increases by the Federal Reserve to three times in 2022, which will suppress precious metals to a certain extent. CPI in the euro zone rose to 5% in December 2021, and the rise in energy prices became the main factor. At present, there is still great uncertainty in European natural gas supply, which may further push up inflation in the euro zone and disturb the supply of high-energy metal products.
The European energy crisis continued to ferment, and Lun aluminum led to the rise of aluminum prices; Macro expectations support copper prices. SHFE aluminum price rose 3% to 20995 yuan / ton. According to wind data, the national aluminum ingot inventory continued to decline, and the social inventory of electrolytic aluminum decreased by 21000 tons to 747000 tons. This week, aluminum prices are still supported by the continued fermentation of the European energy crisis and the low level of Chinese inventory. The European energy crisis continues to ferment. According to SMM data, the current European production capacity affected by the energy crisis is about 800000 tons / year, accounting for 1% of the total global electrolytic aluminum production capacity. Russia said that it would actively reserve natural gas to ensure domestic heating, resulting in the interruption of the “Yamal Europe” natural gas transportation pipeline. However, the market speculates that the interruption of supply may be caused by the suspension of the “Beixi 2” project, It is expected that the European energy crisis will further tighten the supply of overseas electrolytic aluminum. At the same time, the State Council issued a notice on the overall plan for the pilot of comprehensive reform of market-oriented allocation of factors, pointing out that carbon emission rights will be further improved from 2021 to 2025, and electrolytic aluminum enterprises with clean energy are expected to continue to benefit. SHFE copper fell 0.86% to 69520 yuan / ton this week. The tightening speed of the Federal Reserve exceeded expectations and became the main factor affecting copper prices. China’s demand is still relatively weak after new year’s day. In addition, due to the expansion of the scope affected by the epidemic and limited transportation, we expect that there may be no bright spots on the demand side before the lunar new year. Manufacturers mainly focus on bargain hunting and replenishment, and the market turns to the demand expectation for the peak season after the year. Overseas demand is relatively strong. After the primary copper output in 2021 is lower than expected, the certainty of copper supply will increase in 2022, and the new and expanded production capacity in South America, Africa and Southeast Asia will enter the climbing production period. According to Baichuan information, the global copper concentrate output increment in 2022 will reach 115000 tons, supporting the rise of smelting and processing costs. Considering the extremely low global inventory in the short term, China’s off-season at the beginning of the year, and the supply side release still needs a certain cycle, it is difficult for copper prices to break the shock pattern, and focus on tracking the transition from the off-season to the peak season after the lunar new year.
The price of electric carbon exceeded 300000 yuan / ton. This week, the price of lithium carbonate in Wuxi increased by 5.71% to 388500 yuan / ton, the price of industrial carbon and electric carbon in Baichuan increased by 7.8%, 6.4% to 277500 yuan / ton, the price of lithium hydroxide increased by 6.3% to 244400 yuan / ton, the price of spodumene increased by 2.8% to 2575 dollars / ton, and the spot price of lithium carbonate exceeded 300000 yuan / ton. At the end of the year, some manufacturers entered the shutdown and maintenance stage, the output continued to decrease, and the capacity release of lithium concentrate was limited, resulting in the failure to fully release the capacity of lithium salt. This week, the operating rates of lithium carbonate and lithium hydroxide decreased by 4.3%, 6.9% to 40.1% and 53.71% month on month respectively, and the output decreased by 4.3%, 6.9% to 3633 and 3731 tons month on month respectively. The market supply shortage intensified, there was no large shipment, and the inventory consumption was obvious. The inventory of lithium carbonate and lithium hydroxide decreased by 6%, 1.51% to 5200 and 391 tons month on month respectively. On the demand side, various auto companies announced the auto output and delivery in 2021. Tesla still produced 930000 vehicles and delivered 936000 vehicles in 2021, an increase of 87.4% year-on-year in the face of core shortage and epidemic situation; China’s new power car enterprises have made outstanding achievements. The annual delivery volume of Xiaopeng, Weilai and ideal was 98200, 91400 and 90500 respectively, with a year-on-year increase of 260%, 109% and 177%. The high prosperity of the industry has accelerated the expansion of midstream links such as lithium salt plant, cathode material plant and battery plant. However, the construction cycle of lithium resources and lithium salt plant is different, resulting in the mismatch between supply and demand of lithium resources, which will be difficult to effectively alleviate in the next few years, and lithium resource enterprises will face re evaluation of value. 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 rose sharply. Neodymium oxide and metal neodymium increased by 85000 / ton to a new high of 1015000 / ton and 1.24 million / ton respectively this week, and neodymium iron boron blank increased by 12000 / ton. At the end of the year, the shortage of rare earth oxides intensified, and magnetic material manufacturers locked goods after receiving orders, driving the rise of rare earth prices. According to the calculation that the content of praseodymium and neodymium in high-end NdFeB is 30%, the cost of magnetic materials increases by 25500 / ton, while the price of magnetic materials only increases by 12000 / ton, which further tests the technical level of magnetic material manufacturers and the cost conduction ability of high-end products. China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) signed a 2022 rare earth ore supply agreement with Inner Mongolia Baotou Steel Union Co.Ltd(600010) and agreed to increase the price of rare earth ore by 51% to 26887 yuan / ton, with a total supply of no more than 230000 tons; At present, the market price of 50% mixed dilute carbonate ore is 61000-64000 / T including tax, which is more than 100% higher than the above agreement price. There is no sign of improvement in the upstream mine in the short term. Before the issuance of China’s first batch of rare earth mining quotas in 2022, we expect the rare earth price to remain strong, and the ability of high-end magnetic material manufacturers to transmit costs to the downstream is also expected to improve.
The interest rate increase is expected to be advanced, and precious metals are under pressure. SHFE gold fell 1.4% to 369.6 yuan / g, SHFE silver fell 4.6% to 4657 yuan / kg, and the real yield of us 10-year Treasury bonds rose 0.32% to – 0.72%; SPDR’s gold position was 977.08 tons, up 1.42 tons from the beginning of the week, and SLV’s silver position was 16500 tons, basically the same as last week. The minutes of FOMC meeting in December this week indicated that it would accelerate the pace of interest rate increase, exceeding market expectations. Meanwhile, Brad said that it might raise interest rates as early as March, and the precious metals fluctuated downward during the week. The Fed’s minutes may be biased towards eagle, which may deepen the market’s expectation of multiple interest rate increases by the fed in 2022. Precious metals are still affected by the interest rate increase expectation in the short term. It is suggested to continue to pay attention to the interest rate increase policies of various countries.
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.
