Some auto enterprises resumed work and production, and the marginal demand for metal improved. China’s GDP in the first quarter increased by 4.8% year-on-year. Although affected by the epidemic, it still maintained a recovery trend month on month. At present, the epidemic has become the core factor affecting economic expectations, but some auto enterprises in Shanghai have begun to resume work and production, which is expected to drive the gradual recovery of industrial chain demand. It is expected that in the future, with the further control of the epidemic and policy support, industrial demand will fully recover. Under the pressure of high inflation, the market has high expectations of the Federal Reserve’s radical tightening, but we believe that the anti inflation attribute of metal resource products will continue to strengthen. Even if the interest rate increase inhibits demand, under the background of weak supply and demand, metal inventories will remain low, and the high operation trend of metal prices will not change.
Aluminum price is still supported, waiting for demand recovery; Short term copper prices are still dominated by shocks. SHFE aluminum prices fell 1.4% to 21525 yuan / ton. According to wind data, aluminum ingot inventory decreased by 45000 tons to 994000 tons. According to Baichuan Yingfu, as of April 21, China’s resumed production capacity was 2.23 million tons / year, and the new production capacity has been put into operation 1.12 million tons / year, an increase of 70000 tons / year and 100000 tons / year respectively compared with last week. The aluminum price is affected by the epidemic in East China, and the demand performance is not prosperous in the peak season. However, after Shanghai released the guidelines for industrial enterprises to resume work and production last week, the operating rate of downstream processing enterprises has rebounded (according to Baichuan Yingfu, the operating rate of aluminum sector, strip and foil has rebounded by 0.15pct to 35.03%, and the operating rate of aluminum rod has rebounded by 0.7pct to 43.23%). It is expected that after the epidemic in East China has eased, the recovery of downstream orders will drive the repair of demand. From the import and export side, China imported 18000 tons of aluminum ingots and exported 25000 tons in March, with month on month changes of – 53% and 624% respectively (including Montenegro and the Netherlands as the main importers). China continued to maintain the trend of net import. The current conflict between Russia and Ukraine still affects the supply of overseas electrolytic aluminum. It is expected that China’s aluminum ingots will still have export power and support the aluminum price center when the relationship between the two sides has not been eased. Based on the above analysis, the current aluminum price is still mainly disturbed by the epidemic. It is expected that the demand repair brought by the easing of the epidemic and the continuation of the conflict between Russia and Ukraine will continue to support the aluminum price. SHFE copper price rose 0.7% to 74110 yuan / ton, and LME + SHFE inventory accumulated 29000 tons to 260000 tons. At present, the copper price is still mainly affected by the macro and supply and demand fundamentals. Although some smelters in China are overhauled, the demand places are still disturbed by the epidemic, the transportation rhythm is disrupted, and the demand support is weak. However, the holiday is approaching, the willingness of some downstream to replenish the warehouse is becoming stronger, and Shanghai copper is obviously going to the warehouse. Macroscopically, the Fed continues to release hawkish signals, and is expected to continue to suppress the copper price before the interest rate meeting, and the short-term copper price is still dominated by shock.
The gradual resumption of production by automobile enterprises will drive the recovery of lithium demand. This week, the price of lithium carbonate in Wuxi rose by 1.96% to 443000 yuan / ton, Baichuan electric carbon and industrial carbon fell by 1.1%, 1.0% to 475400 yuan / ton and 46000 yuan / ton respectively, and the price of lithium hydroxide fell by 2.1% to 498400 yuan / ton. Spodumene prices rose 9.7% to US $3100 / ton, and lithium carbonate prices continued to decline. The supply of lithium carbonate increased slightly this week, the operating rate increased by 1.88pct to 47.13% month on month, and the output increased by 1.87% to 4360 tons month on month; The output of lithium hydroxide was released due to the drag of demand. The operating rate decreased by 6.6pct to 46.30% month on month, the output decreased by 9.74% to 3940 tons month on month, and the inventory of the two increased by 1.27% and 17.86% to 5005 and 627 tons month on month respectively. On the demand side, Shanghai Economic and Information Technology Commission released the list of the first batch of enterprises to resume work and production, including Shanghai passenger car, SAIC Volkswagen, SAIC GM and Tesla (Shanghai). With the official resumption of Shanghai Tesla factory on April 19, many Tesla parts suppliers in Shanghai also began to resume work and production. The Zhejiang provincial government will also guide Tesla suppliers in the province to actively linkage, open up logistics and support Tesla to resume vehicle manufacturing. In addition, Weilai said that production in Hefei base has been gradually resumed, and government departments such as Anhui Province and Hefei City have taken relief measures against the obstruction of the supply chain. We expect that under the premise of effective control of the epidemic, the gradual resumption of production of automobile enterprises will drive the recovery of lithium demand. In addition, Pilbara plans to hold a lithium concentrate auction next week, and the price may break a new high, and the cost side continues to support the price of lithium salt. On the whole, 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 the price of lithium salt, but the price of lithium concentrate continues to rise and the cost side support of lithium salt is strong. 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 re stabilization of lithium price correction is more conducive to the valuation repair of relevant companies in the lithium sector.
Light rare earth prices rose and fell, while heavy rare earth prices rose steadily. The price of dysprosium oxide rose from rmb2.589 million / ton to rmb2.555 million / ton of neodymium oxide this week, down from rmb2.515 million / ton. On Tuesday, the Ministry of energy hoped to suppress the good news of the return of rare earth prices to the Shanghai auto market as soon as possible. At present, after long-term price reduction of praseodymium and neodymium, the market has squeezed out some bulk inventory, and we think the risk is weakening; Heavy rare earths have strong price support under the willingness of enterprises to support prices, and traders have sufficient confidence. The price may remain stable.
It is suggested to pay attention to the window period of precious metal price allocation under the interest conference. SHFE gold fell 0.6% to 405.34 yuan / g, and SHFE silver fell 4% to 5066 yuan / kg; The real yield of us 10-year Treasury bonds fell 2pct to – 0.08%; SPDR’s gold position increased by 5 tons to 1099 tons, and SLV’s silver position increased by 300 tons to 18000 tons. This week’s precious metal prices are mainly affected by the Fed’s expectation of raising interest rates. Since the middle of the week, the Fed has continued to release “hawkish” information. Powell hinted that the interest rate hike may be ahead of schedule, and it is expected that the interest rate hike is expected to be 50bp in May. The expectation of interest rate hike is getting stronger and stronger, and the precious metal price fluctuates downward. In the medium and long term, the current inflation expectation is still high. At the same time, the IMF lowered the global economic growth prospects, suggesting that the current energy prices may exacerbate the risk of economic fluctuations in emerging markets and developing countries. Inflation and recession expectations still support precious metal prices. It is suggested to pay attention to the window period of precious metal price allocation under the interest rate conference.
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.
