Weekly report of Nonferrous Metals Industry: the core CPI of the United States decreased month on month, and China promoted the resumption of work and production

[Key words of this week]: the durable goods items of the core CPI of the United States turned negative month on month in March, the Central Bank of China lowered the reserve requirement by 25bp, and Shanghai orderly promoted the resumption of work and production of enterprises

Market review: 1. The CPI and PPI of the United States reached a new high year-on-year in March. The Central Bank of China lowered the deposit reserve ratio of financial institutions by 0.25 percentage points, and the impact of the epidemic continued: 1) base metals and CPI durable goods in the United States turned negative month on month. The epidemic continued to impact China’s demand, with LME aluminum and copper falling by 2.2% and 0.1% respectively; 2) Precious metals, high inflation and geopolitical situation supported the high price of gold. The real yield of 10-year US bonds increased from – 0.15% → – 0.06%, Comex gold closed at US $1974.9/oz, up 1.51% month on month, and SHFE gold closed at 405.82 yuan / g, up 2.47% month on month. 2. This week, A-Shares fell as a whole. Shenwan nonferrous metals closed at 507720 points, down 2.94% month on month, outperforming the Shanghai Composite Index by 1.69 percentage points. Among them, industrial metals, gold, rare metals and new metal and non-metallic materials rose or fell by 0.34%, – 1.58%, – 3.30% and – 5.47% respectively.

Macro “three factors” summary: China’s deposit reserve ratio decreased by 25bp; The CPI and PPI of the United States reached a new high year-on-year in March, but the durable goods items of the core CPI turned negative month on month; The European Central Bank kept the three key interest rates unchanged, the economic boom in the euro area fell and the epidemic cooled down. Specifically: 1) in China, CPI rebounded year-on-year in March, and PPI fell year-on-year. China’s CPI in March was 1.50% year-on-year (the previous value was 0.90%, the expected value was 1.26%); PPI in March was 8.30% year-on-year (the previous value was 8.80%, and the expected value was 7.97%); In March, M0 was 9.90% (previous value: 5.80%), M1 was 4.70% (previous value: 4.70%), M2 was 9.70% (previous value: 9.20%, expected value: 9.16%); In March, the social financing scale was 4.65 trillion yuan (the former value was 1.19 trillion yuan), a year-on-year increase of 10.60% (the former value was 10.20%). 2) In the United States, CPI and PPI in March reached a new high year-on-year. In March, CPI in the United States was 8.50% year-on-year (previous value 7.90%, expected 8.40%), CPI quarter on quarter (QoQ) was 1.20% (previous value 0.80%, expected 1.20%), core CPI was 6.50% year-on-year (previous value 6.40%, expected 6.60%), and core CPI quarter on quarter (QoQ) was 0.30% (previous value 0.50%, expected 0.50%), in which the durable goods items of core CPI turned negative; The quarterly adjustment of core PPI in March was 10.00% year-on-year (9.70% of the previous value), the quarterly adjustment of core PPI was 1.10% month on month (0.80% of the previous value), the quarterly adjustment of final demand for PPI in March was 11.20% year-on-year (10.40% of the previous value, 10.60% expected), and 1.40% month on month (0.90% of the previous value, 1.10% expected); The US retail and food service sales in March were 6.88% year-on-year (previous value 18.18%), and the total retail sales in March were 0.44% quarter on quarter (previous value 0.52%); 3) The ZEW Economic Climate Index of the euro zone fell slightly, the epidemic cooled, and the European Central Bank kept the three key interest rates unchanged. In April, the ZEW Economic Climate Index of the euro zone was -43.00 (the previous value was -38.70); This week, the UK, Germany and France added 3051468 cases of covid-19 on a daily basis, a decrease of 838724 cases compared with last week, cooling the epidemic. 4) In March, the global manufacturing PMI recorded 53.0, down 0.6 month on month, and the global economy entered the downward stage of the boom trend for further verification.

Precious metals: high inflation and geopolitical situation are still the core factors supporting the price of precious metals. During the week, the news from Russia and Ukraine said that both Ukraine and Russia have recently invested reinforcements in eastern Ukraine. The news has affected that the two sides may trigger the largest military conflict. The geopolitical conflict continues to enhance the market risk aversion; During the week, the CPI of the United States recorded a year-on-year increase of 8.5% in March, the highest in nearly 40 years, and the PPI recorded a year-on-year increase of 11.2%, the highest since 2010. Overseas high inflation supported the high price of precious metals. As of April 15, Comex gold closed at US $1974.9/oz, up 1.51% month on month; COMEX silver closed at US $25.7/oz, up 3.53% month on month; SHFE gold closed at 405.82 yuan / g, up 2.47% month on month; SHFE silver closed at 5235 yuan / kg, up 4.08% month on month.

Base metals: the US CPI durable goods sub item turned negative month on month, and the epidemic continued to impact China’s demand. During the week, the US core CPI durable goods sub item turned negative month on month, and the supply-demand relationship of overseas durable goods weakened; The impact of the epidemic is still the main logic of market transactions. After the Ministry of Communications issued a document, the logistics congestion in various places has improved slightly; In addition, the executive meeting of the State Council issued a series of steady growth policies, and the central bank decided to reduce the reserve requirement by 0.25 percentage points on April 25, 2022. Specifically, LME copper, aluminum, lead, zinc, tin and nickel rose or fell by – 0.1%, – 2.2%, 1.6%, 3.1%, – 0.3% and – 2.5% respectively this week. The overall price fell.

1. For electrolytic copper, the epidemic situation in China is still the main logic of market transactions. Since the Ministry of Communications issued a document, the logistics congestion in various regions has been slightly better and the tension of raw materials has been slightly eased, but the impact of the epidemic on procurement and transportation in the short term is still continuing; In terms of consumption, the high copper price makes the downstream face the pressure of capital. At present, the production is mostly determined by sales, and the raw material inventory remains low. On Wednesday, the social inventory of electrolytic copper was 132500 tons, and the weekly inventory was 0500 tons.

2. For electrolytic aluminum, the overall stable operation of China’s supply side; On the demand side, since the Ministry of Communications issued a document, local traffic has improved, and the construction of underground tourism in Shandong and Wuxi has recovered. However, the poor transportation continues in the short term, and the downstream operation rate is still at a low level. Industrial chain profit update: calculated according to the market price of real-time raw materials, the price of alumina was 2976 yuan / ton, and the gross profit per ton was 71 yuan / ton, down 19.58% month on month; The anode price was 7048 yuan / ton, and the gross profit per ton was 728 yuan / ton, down 41.00% month on month; The spot price of electrolytic aluminum in the Yangtze River was 21730 yuan / ton, and the profit per ton of aluminum was 2823 yuan, down 2.83% month on month. This week, the total inventory of aluminum ingots in eight places in China was 1063000 tons, and the weekly inventory was 3000 tons.

3. For zinc ingots, the strong logic of overseas energy has a strong pull on the price; In China, supply and demand are both weak. On the supply side, due to the downward price comparison, Chinese refineries refuse to mine imported ore, which intensifies the shortage on the mine side, the impact of the epidemic continues on the consumer side, the transportation of raw materials and finished products is greatly limited, and the downstream consumption is weak. This week, the total inventory of zinc ingots in seven places was 284100 tons, and the weekly cumulative inventory was 6100 tons.

Investment suggestion: maintain the “overweight” rating of the industry

1. For precious metals, under the impact of oil price and supply chain impact, overseas inflation data continued to rise and hit a new high in recent 40 years. The market continued to increase concerns about inflation, and precious metal prices are expected to be supported.

2. For base metals, China’s economic work in 2022 will be “stable”, and it is expected that the follow-up steady growth policies will be introduced continuously to support the confidence of base metal demand. However, from a global perspective:

1) changes in the structure of overseas economic demand before, during and after the epidemic;

2) the Fed raised interest rates, but the tightening trend of overseas liquidity is expected to accelerate and suppress the demand for base metals. Look for structural opportunities brought by supply change in non directional assets.

Core target:

1) base metal: Yunnan Aluminium Co.Ltd(000807) , Henan Shenhuo Coal&Power Co.Ltd(000933) , Tianshan Aluminum Group Co.Ltd(002532) , Sunstone Development Co.Ltd(603612) , Zijin Mining Group Company Limited(601899) , Jchx Mining Management Co.Ltd(603979) , Tongling Nonferrous Metals Group Co.Ltd(000630) , etc.

2) precious metals: Shandong Gold Mining Co.Ltd(600547) , Chifeng Jilong Gold Mining Co.Ltd(600988) , Yintai Gold Co.Ltd(000975) , Shengda Resources Co.Ltd(000603) , etc.

Risk tips: macroeconomic fluctuation, import and environmental protection policy risk, gold price fluctuation risk, lower than expected risk of new energy vehicle sales, lower than expected risk of premise assumption of supply and demand calculation, etc.

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