China has entered a new round of interest rate cut cycle, and its deviation from the US monetary policy has intensified. On January 18, the National Bureau of statistics released the GDP data of 2021, with a year-on-year increase of 8.1%, corresponding to a 4% increase in the fourth quarter, slightly higher than expected; The data of investment, consumption and industrial added value are mixed. On the 18th, the central bank lowered the 1-year MLF and 7-day reverse repo interest rate 10bp to 2.85% and 2.1%, and the corresponding LPR and SLF interest rates were adjusted to confirm that China has entered a new round of interest rate reduction cycle, and the Reserve monetary policy space in the early stage has been gradually released. In addition, the implementation of fiscal policy will also be accelerated, the issuance of special bonds will be accelerated, and the infrastructure is expected to be significantly strengthened, supporting the demand expectation of China’s metal commodities. Overseas, the pace of tightening in the United States has accelerated, and the market has basically reflected the first interest rate increase in March and three interest rate increases in the year. There are still some differences on the timing and speed of the reduction. Different from the excessive economic growth and high demand for tropical moving metals in the previous two rounds of fed interest rate hike cycles, inflation is the most important consideration in this round of interest rate hike cycle, so the impact on metal commodities is different. Limited supply side and high profitability did not bring extensive capital expenditure, further limiting the release of supply; In the first two rounds, high demand driven high prices, and the supply side of various metal products obviously released surplus. Therefore, we believe that this round of fed interest rate hikes may suppress or relatively ease the pressure on metal prices; While the real interest rate of precious metals shows certain anti inflation properties under the dual pressure of rising nominal interest rate and falling inflation expectation.
Aluminum fundamentals are still supported; China’s macro expectations support copper prices. SHFE aluminum prices rose 0.3% to 21220 yuan / ton. This week, affected by the macro interest rate reduction policy, electrolytic aluminum is still supported by the superposition of fundamentals, and the aluminum price maintains an upward trend. In terms of fundamentals, the continuous fermentation of the European energy crisis supports overseas fundamentals. Although some aluminum factories in China resume production, there are few shipments. The demand side enters the off-season affected by the Spring Festival holiday, while the fundamentals are still supported by the expected reduction of overseas electrolytic aluminum production. On the cost side, with the Winter Olympic Games approaching, some alumina plants in Henan and Shandong have successively received production reduction notices. The market expects that the alumina price may rise due to the impact of the Winter Olympic Games. Some northern aluminum enterprises begin to prepare goods, and the phenomenon of transporting goods from south to North is more obvious. It is expected that on the premise of basically good orientation and phased upward price of aluminum oxide, Enterprises that enjoy the reversal of industry profits and have southwest alumina production capacity are expected to benefit. SHFE copper fell 0.24% to 71290 yuan / ton this week. The Fed’s expectation of raising interest rates three to four times in the whole year was basically reflected. China’s interest rate reduction cycle started and the better than expected economic data at the end of 2021 supported copper prices. The decline in consumption in the off-season was fully digested, and the market’s expectation of demand in the peak season after the year was high; The superimposed inventory has not been significantly replenished, and even if the supply increment of primary copper is large in 2022, there is no obvious pressure on the price. We believe that the tight balance between supply and demand fundamentals will not be broken in the short term. It is difficult for copper prices to form a unilateral upward or downward market, and will still fluctuate around 70000 yuan / ton.
In 2021, the global sales volume of new energy vehicles was 6.74 million. This week, the price of lithium carbonate in Wuxi increased by 1.78% to 371500 yuan / ton, the price of industrial carbon and electric carbon in Baichuan increased by 8.1%, 7.5% to 335500 yuan / ton, the price of lithium hydroxide increased by 8.5% to 292400 yuan / ton, the price of spodumene increased by 0.4% to 2685 dollars / ton, and the price of lithium continued to accelerate. The operating rates of lithium carbonate and lithium hydroxide remained low, falling by 1.99% and 4.62% to 37.96% and 49.35% month on month respectively. Their inventories decreased by 1.67% and 1.35% to 4996 and 366 tons month on month respectively. The output of lithium carbonate decreased by 1.99% to 3439 tons month on month, and the output of lithium hydroxide increased by 1.11% to 3635 tons month on month. On January 20, Serbia rejected the largest lithium mine plan in Europe, revoked Rio Tinto’s jadar lithium exploration license and announced the complete cessation of the project. As countries around the world gradually realize the strategic importance of lithium resources, resource protectionism will become more and more intense, and the development of lithium resources will face more uncertain factors. The demand side remained strong. According to evvolumes, the global sales volume of new energy vehicles in December was 932000, an increase of 27% month on month and 53% year-on-year; The annual sales volume was 6.738 million, a year-on-year increase of 108%. At present, there is no sign of improvement in the supply and demand pattern of lithium. It is expected that the lithium price will continue to maintain the upward trend, and the performance of lithium related companies will be greatly released in 2022, focusing on the performance of the first quarter.
Rare earth and magnetic materials rose sharply. Neodymium oxide and metal neodymium rose by 40000 / ton to 1065000 / ton and 1290000 / ton respectively this week, and the price of neodymium iron boron blank was stable. At the end of the year, the shortage of rare earth oxides intensified, the logistics was stopped gradually, the trading was light, the willingness of the upstream to stop orders and support prices was strong, and the downstream goods preparation was basically completed. There is no sign of improvement in the supply side of rare earth. Before the issuance of China’s first batch of rare earth mining quotas in 2022, the price of rare earth may still maintain an upward trend. It is necessary to closely observe the recovery of overseas supply after the year.
US jobless claims rebounded and precious metal prices rose. SHFE gold rose 0.6% to 376.52 yuan / g, SHFE Silver Rose 4.5% to 5013 yuan / kg, and the real yield of us 10-year Treasury bonds rose 7pct to – 0.59%; SPDR’s gold position was 1008 tons, up 32 tons, and SLV’s silver position was 16200 tons, basically the same as last week. The number of initial claims for unemployment benefits in the United States rose to 286000 last week, a new high since October 2021, indicating that Omicron still interferes with the employment market, the decline of superimposed stocks and bonds, the inflection point of inflation expectation, and the safe haven and anti inflation properties of precious metals. However, it is still necessary to consider the suppression of precious metals by the Federal Reserve in the expectation of raising interest rates, It is suggested to continue to pay attention to the monetary policies of various governments and the interest rate meeting of the Federal Reserve next week.
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 (lithium cobalt nickel rare earth) and new metal materials benefiting from industrial upgrading and domestic substitution. In 2022, non-ferrous metal prices will remain high as a whole, corporate profits are expected to continue to increase significantly, and the valuation of the sector will return to a low level. Under the background of China’s continued loose monetary policy, we expect the valuation of the non-ferrous sector to repair the market. 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; 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) , Lizhong Sitong Light Alloys Group Co.Ltd(300428) , Sunstone Development Co.Ltd(603612) etc. for industrial metals.
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.
