Industrial production and consumption improved, and demand resumed to support metal prices. In December, China’s financial data bottomed out and rebounded, and demand improved to support metal prices. In December 2021, China’s financial and export data continued to improve. In that month, social finance and RMB loans increased by 2.37 trillion and 1.13 trillion, driving the growth rate of M1 and M2 to rebound by 0.5pct to 3.5% and 9% respectively. As a leading indicator of the economy, financial data is expected to continue to pick up under the guidance of stable economic policies, and the good trend will continue in 2022. Meanwhile, China’s imports and exports remained high in December. The dollar denominated prices were 19.5% and 20.9% year-on-year respectively in the same month, and the cumulative year-on-year figures for the whole year were 30.1% and 29.9%; The unexpected performance of import and export is an important support for the economy in 2021. It is expected to exceed the expected performance in 2022 when the overseas supply chain is still affected by the epidemic. Overseas, the CPI of the United States in December increased by 7% year-on-year, a 40 year high. The rising prices of energy and transportation are the main driving factors. Fed officials have some differences in liquidity tightening and the progress of interest rate hikes, and the market has gradually formed consistent expectations for the frequency and rhythm of fed interest rate hikes; The US dollar index fell significantly, and the expected impact of liquidity contraction on metal prices declined.
The production reduction of French aluminum plant continued, and the industry profit continued to expand; China’s macro expectations support copper prices. SHFE aluminum price closed at 21005 yuan / ton, basically the same as last week. According to wind data, the national aluminum ingot inventory continued the downward trend, and the social inventory of electrolytic aluminum decreased by 49000 tons to 698000 tons. The impact of the European energy crisis on electrolytic aluminum continued this week. In the middle of the week, the production reduction scale of Dunkirk smelter in France was expanded to 15%, and the production reduction capacity in Europe was expanded to 830000 tons / year. In China, limited by 2021, the production capacity has resumed one after another, but the outflow and arrival of aluminum ingots are less, and the removal of aluminum ingots to the warehouse continues. On the supply side, the reduction in production caused by the European energy crisis still forms a strong support for aluminum prices. On the cost side, the price of raw materials changed steadily this week, and the gross profit of the industry expanded to 4394 yuan / ton. It is suggested to pay attention to electrolytic aluminum enterprises with early losses and reversed profits. SHFE copper fell 30.6% to 71460 yuan / ton this week. The expectation that the Federal Reserve may raise interest rates in March was fully priced in the copper price. US inflation exceeded expectations and China’s financial data continued to support copper speculation and real demand, driving the copper price up to around 72000 yuan / ton; However, after the crowding before delivery caused by low inventory, the copper price returns to the game between very low inventory and the decline of off-season demand, and the market transaction gradually turns to the recovery of demand after the year. Therefore, we believe that it is difficult to break the tight balance between supply and demand fundamentals in the short term, and the copper price will still fluctuate in the range of 70000 yuan / ton, focusing on tracking the transition of off-season and peak season after the lunar new year.
Lithium prices rose more than 10% this week. This week, the price of lithium carbonate in Wuxi fell by 6% to 365000 yuan / ton, the prices of industrial carbon and electric carbon in Baichuan increased by 11.9%, 11.6% to 310500 yuan / ton, lithium hydroxide increased by 10.2% to 269400 yuan / ton, spodumene increased by 3.9% to 2675 dollars / ton, and the price of lithium continued to accelerate. The supply of lithium concentrate is still in short supply. The operation of major lithium carbonate plants is stable, and the operation of small plants is poor due to the restriction of raw material end. Most lithium hydroxide manufacturers still suspend external quotation, the supply of industrial grade lithium hydroxide that can be used to produce lithium carbonate by carbonization is difficult to find, and the inventory consumption of battery grade lithium hydroxide is obvious. Superimposed on the factors that some manufacturers entered the shutdown and maintenance stage near the Spring Festival, the operating rates of lithium carbonate and lithium hydroxide decreased by 3.4%, 3.7% to 38.73% and 51.74% month on month respectively, the output decreased by 3.4%, 3.7% to 3509 and 3595 tons month on month respectively, and the inventory decreased by 2.29%, 5.12% to 5081 and 371 tons month on month respectively. On the demand side, according to China Automobile Association, the production and sales of new energy vehicles in China in December were 518000 and 531000 respectively, with a year-on-year increase of 120% and 114% respectively, and a month-on-month increase of 13% and 18%; The annual production and sales volume were 3.533 million and 3.507 million respectively, with a year-on-year increase of 170% and 165%. At the same time, according to the passenger Association, it is expected that the sales volume of Shanxi Guoxin Energy Corporation Limited(600617) vehicles is expected to exceed 6 million in 2022, with a year-on-year increase of about 70% and a penetration rate of 22%. We expect that the shortage of lithium resources will run through 2022 driven by the accelerated expansion of midstream links such as cathode material factory and battery factory and the continuous strong sales of new energy vehicles. The high price of lithium is supported, and lithium resource enterprises will face revaluation. 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 prices remained stable and costs continued to be transmitted downstream. This week, neodymium oxide and metal neodymium increased by 10000 / ton to a new high of 1025000 / ton and 1.25 million / ton respectively, and neodymium iron boron blank increased by 3000 / ton. At the end of the year, the shortage of rare earth oxides intensified, and the lock-in of magnetic material manufacturers after receiving orders promoted the rise of rare earth prices. This week, the downstream goods preparation has basically ended and the market trading is light. In the short term, there is no sign of improvement at the upstream mine end. Before the issuance of China’s first batch of rare earth mining quotas in 2022, we expect that the rare earth price will still be strong. After full cost pressure test, the medium and high-end products will gradually realize smooth cost transmission to the downstream.
The upward superposition of CPI and interest rate hike reiterated that precious metals maintained range shocks. SHFE gold rose 1.2% to 372.38 yuan / g, SHFE Silver Rose 3.2% to 4761 yuan / kg, and the real yield of us 10-year Treasury bonds rose 6pct- to 0.66%; SPDR held 976 tons of gold and SLV held 16400 tons of silver, basically the same as last week. The CPI of the United States in December rose by 7% year-on-year, the largest increase since June 1982. High inflation made the price of precious metals get out of the haze of the accelerated pace of interest rate hike last week. However, at the weekend, the Federal Reserve once again stressed the interest rate hike in advance, and the PPI of the United States in December was lower than expected, the upward pressure on prices was slightly reduced, and the price of precious metals fluctuated downward. At present, the price of precious metals is still suppressed by the Fed’s expectation of raising interest rates. However, considering the balance of the Fed’s policy regulation, the Fed will still appropriately adjust the pace of raising interest rates on the premise of steady economic growth. It is recommended to continue to pay attention to the monetary policies of various countries and the pace of interest rate increase by the Fed.
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.
