China’s RRR reduction supports steady growth and overseas sustained high inflation. On April 15, the central bank announced that it would reduce the deposit reserve ratio of financial institutions by 0.25 percentage points on April 25, 2022. The RRR reduction will help stabilize growth policy, which will further boost consumption in metal related terminal areas. In the short term, high inflation remains the main macro factor supporting metal prices.
From a fundamental point of view, the epidemic situation in China is still the main factor limiting downstream consumption. However, with the further implementation of the Ministry of communications to ensure smooth transportation, the logistics in some parts of China is now marginally improved. It is expected that downstream consumption will gradually return to normal with the further recovery of logistics in the later stage.
Industrial metals
Copper: China’s marginal repair of logistics going to warehouse slightly. In the United States, CPI rose 8.5% year-on-year in March, and PPI recorded a year-on-year increase of 11.2%. High overseas inflation is still the main macro factor supporting the rise of copper prices. From a fundamental point of view, the China electrolytic copper society warehouse on April 15 was 10000 tons more than last week, and the logistics situation was slightly improved. In the later stage, with the further recovery of China’s logistics, the downstream operating rate increases, the lagging orders accelerate production, and the inventory is expected to enter the decline channel again.
Aluminum: China’s short-term mismatch between supply and demand continued, and aluminum export profits remained high. On April 14, China’s electrolytic aluminum social inventory went to the warehouse from 3000 tons to 1063000 tons month on month. The transportation of domestic ore at the raw material end is blocked, resulting in the continuous decline of raw material inventory in some areas, and there may be a risk of production reduction in the short term. The operating rate of downstream aluminum processing end is still affected by the epidemic, the operating rate is flat month on month, and the mismatch between supply and demand of electrolytic aluminum in China continues.
Overseas, LME electrolytic aluminum inventory continued to go to the warehouse and refresh the historical low. The decline of LME aluminum slowed down in the week, and the aluminum export profit remained high. It is expected that aluminum will be exported overseas in the form of aluminum in the short term.
Zinc: European stocks remain low, Chinese raw materials are tightening, and the Chinese epidemic continues to affect the downstream consumption of refined zinc. This week, China’s social refined zinc stocks accumulated 6100 tons to 284100 tons month on month. In terms of supply, the imported zinc concentrate suffered a significant loss, the demand for domestic ore increased, the TC of imported ore / domestic ore continued to differentiate, the supply of raw materials at the smelting end tightened, and the supply of refined zinc was less than expected. In the short term, China’s refined zinc still shows a pattern of weak supply and demand.
Overseas, LME inventory in Europe remains at a very low level of 500 tons, which is a strong driver for zinc price. In the short term, the contradiction of low inventory in Europe is still prominent, and the zinc price is expected to be strong.
Precious metals
Gold: the value of gold allocation continues to rise. This week, the position of gold ETF is still on the rise. In the short term, the gold price is slightly passivated on the actual yield of US bonds. The continued impact of the conflict between Russia and Ukraine and the narrative of “de dollarization” to a certain extent or reduce the sensitivity of gold price to the actual yield of US bonds, the value of gold allocation continues to rise.
Investment suggestion: it is suggested to pay attention to Yunnan Chihong Zinc & Germanium Co.Ltd(600497) , Henan Mingtai Al.Industrial Co.Ltd(601677) , Yunnan Aluminium Co.Ltd(000807) , Chifeng Jilong Gold Mining Co.Ltd(600988) , Shandong Gold Mining Co.Ltd(600547) .
Risk tips: Overseas geopolitical risks; Supply has increased more than expected; The demand is less than expected.
