[Key words this week]: the fed further releases hawkish signals; New home sales in the United States continued to fall; China’s LPR quotation remained unchanged for three consecutive months
Market review: 1. The Federal Reserve released hawkish remarks, China’s LPR quotation remained unchanged for three consecutive months, and the impact of the epidemic continued: 1) base metals. Fed chairman Powell released hawkish signals, and the US dollar index continued to rise. With the continuous rise of overseas interest rates, us new home sales hit a new low since 2020. At the same time, the epidemic continued to impact China’s demand, and the overall pressure on base metals, LME aluminum and copper fell by 1.7% and 1.7% respectively 2.5%； 2) Precious metals, the real yield of 10-year US Treasury bonds increased from – 0.06% → – 0.08%, but the tightening remarks of the Federal Reserve Chairman lifted the US dollar index. Comex gold closed at US $1934.3/oz, down 2.06% month on month, and SHFE gold closed at 406.8 yuan / g, up 0.24% month on month. 2. A shares fell overall this week. Shenwan nonferrous metals index closed at 466677 points, down 8.08% month on month, 4.21 percentage points lower than the Shanghai Composite Index. The declines of new metal and non-metallic materials, gold, industrial metals and rare metals were 4.89%, 7.06%, 7.63% and 8.75% respectively.
Macro “three factors” summary: China’s LPR quotation remained unchanged for three consecutive months, and the impact of the epidemic continued; New housing starts in the United States rose in March, but new housing sales hit a new low since 2020; CPI in the euro area picked up year-on-year and the epidemic cooled down. Specifically: 1) in China, the LPR quotation has remained unchanged for three consecutive months, and the industrial added value decreased year-on-year in March. This week, it was disclosed that the quoted interest rate (LPR) of China’s loan market is: 1-year LPR is 3.7%, and more than 5-year LPR is 4.6%. The LPR quotation has remained unchanged for three consecutive months; The industrial added value in March was 5.00% year-on-year (the previous value was 12.80%, and the expected value was 5.09%), of which the non-ferrous metal mining and beneficiation industry was 11.40% year-on-year, and the non-ferrous metal smelting and rolling processing industry was 6.20% year-on-year; In March, the cumulative investment in fixed assets was 9.30% year-on-year (previous value 12.20%, expected 8.62%), and the total retail sales of social consumer goods in March was – 3.53% year-on-year (previous value 6.70%, expected – 0.83%); GDP in the first quarter was 4.80% year-on-year (previous value 4.00%, expected 4.72%). 2) In the United States, the sales of existing homes continued to decline in March. In the United States, the annual sales of existing homes in March were 5.77 million units (the former value was 5.93 million units), and 147400 private houses were started in new homes (the former value was 126400 units); In April, Markit’s manufacturing PMI increased by 59.7 (previous value 58.8, expected 58.0) and service business activity PMI increased by 54.7 (previous value 58.0, expected 58.2); The number of initial jobless claims in the United States this week was 184000, down by 2000 month on month; 3) The CPI of the euro area rebounded year-on-year, fell month on month, and the epidemic cooled down. It was disclosed this week that the CPI of the EU in March was 7.8% year-on-year (the previous value was 6.2%); In March, the CPI of the euro area was 7.4% year-on-year (the previous value was 5.9%, the expected value was 7.5%) and 2.4% month on month (the previous value was 0.9%, the expected value was 2.5%); This week, the United Kingdom, Germany and France added 2573804 cases of covid-19 on a daily basis, a decrease of 477664 cases compared with last week, and the epidemic has cooled down. 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: the Fed releases hawkish remarks, and the price of gold is under pressure
During the week, US Federal Reserve Chairman Powell said at the IMF meeting that it is absolutely necessary to curb inflation and restore price stability. The US Federal Reserve meeting in May will discuss the issue of raising interest rates by 50 basis points, suggesting that the US Federal Reserve may take active measures to curb inflation. Under the “hawkish” remarks of the US Federal Reserve, the US dollar index rose and the gold price fell. Gold fell 22.comex/oz as of March 19306; COMEX silver closed at US $24.259/oz, down 5.61% month on month; SHFE gold closed at 406.8 yuan / g, up 0.24% month on month; SHFE silver closed at 5098 yuan / kg, down 2.62% month on month.
Base metals: the US dollar index put pressure on base metals, and the epidemic continued to impact China’s demand. During the week, US Federal Reserve Chairman Powell released a hawkish signal, and the US dollar index continued to rise after breaking 100, putting pressure on the price of base metals; At the same time, China’s epidemic continues to impact downstream demand. The epidemic is still the main logic of market trading. In the short term, the supply and demand of base metals are weak. Specifically, LME copper, aluminum, lead, zinc, tin and nickel rose or fell by – 2.5%, – 1.7%, – 2.5%, – 0.8%, – 2.7% and 0.0% respectively this week. The overall price fell.
1. For electrolytic copper, China’s epidemic is still the main logic of market trading, and the inventory is still in the state of de stocking. In addition, China’s smelters ushered in a centralized maintenance period from April to may, and China’s inventory continues to maintain a historically low level; In terms of consumption, the operating rate of copper downstream under the influence of the epidemic is low, and the high copper price makes the downstream face the pressure of capital, which inhibits the demand for copper under the wait-and-see mood. On Wednesday, the social inventory of electrolytic copper was 122400 tons, and the weekly inventory was 10100 tons.
2. For electrolytic aluminum, China’s supply side, after the centralized resumption of production in Q1, the growth rate of Q2 slowed down, and the overall output showed a stable growth; On the demand side, the start-up of China’s downstream processing enterprises decreased slightly during the week, mainly due to the shortage of orders and raw materials and production reduction of aluminum sector, strip, foil and aluminum profile enterprises in Shanghai. However, the start-up of underground tourism in South China and Central Plains improved, and enterprises were active in replenishing stocks. Calculated according to the market price of real-time raw materials, the price of alumina was 2994 yuan / ton, and the gross profit per ton was 88 yuan / ton, up 24.47% month on month; The anode price was 7048 yuan / ton, and the average gross profit per ton during the week was 511 yuan / ton, down 35.73% month on month; The spot price of electrolytic aluminum in the Yangtze River was 21800 yuan / ton, and the profit per ton of aluminum was 2821 yuan, down 0.09% month on month. This week, China’s aluminum ingot inventory in eight places totaled 1021000 tons, and 42000 tons went to the warehouse every week.
3. For zinc ingots, overseas, the negative attitude of European countries towards the settlement of Russian natural gas in rubles has increased the expectation of energy shortage, and there is no news of further resumption of production of smelters. In addition, LME zinc inventory continues to decline, aggravating the market’s concern about the shortage of supply side; China is weak in both supply and demand. On the supply side, due to the downward price comparison, Chinese refineries refuse to mine imported ore, exacerbating the shortage at the mine end. At the same time, the transportation problems caused by China’s epidemic also amplify the shortage at the smelting end. The total inventory of zinc ingots in seven places this week was 283600 tons, and the weekly inventory was 0500 tons.
Investment suggestion: maintain the “overweight” rating of the industry
1. For precious metals, under the impact of oil price and supply chain, overseas inflation continued to rise and hit a new high in nearly 40 years. The market’s concern about inflation continued to intensify, and the price of precious metals is expected to be supported in the short term.
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.
