Industrial production and consumption have improved, and demand has resumed to support metal prices. China's financial data bottomed out in December as demand improved to support metal prices. China's financial and export data continued to improve in December, when social finance and RMB loans increased by 2.37 trillion and 1.13 trillion, respectively, driving M1 and M2 to rebound to 3.5 per cent and 9 per cent, respectively. Financial data as a leading indicator of the economy, under the guidance of stable economic policy, economic data is also expected to continue to pick up, and the positive trend will continue in 2022. At the same time, China's imports and exports remained high in December, with US dollar-denominated year-on-year figures of 19.5% and 20.9% respectively, with a cumulative year-on-year total of 30.1% and 29.9%. The better-than-expected performance of imports and exports is an important support for the economy in 2021, and it is still expected to exceed expectations in 2022 when the overseas supply chain is still affected by the epidemic. Overseas, CPI in the United States rose 7% in December from a year earlier, a 40-year high, mainly driven by rising energy and transportation prices. Fed officials have some differences in liquidity tightening and the progress of raising interest rates, while the market gradually formed consistent expectations for the frequency and pace of Fed rate increases; the dollar index fell significantly, and the impact of liquidity contraction expectations on metal prices declined.
French aluminum plants continue to reduce production, industry profits continue to expand; domestic macro expectations to support copper prices. SHFE aluminum price closed at 21005 yuan / ton, basically the same as last week. According to wind data, the national inventory of aluminum ingots continued to decline, electrolytic aluminum social inventory 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 the Dunkirk smelter in France expanded to 15%, and the production capacity in Europe expanded to 830000 tons per year. On the domestic side, due to the limit of 2021 film production capacity, production has been resumed one after another, but the outflow and arrival of aluminum ingots are less, and the removal of aluminum ingots continues. On the supply side, the production reduction brought about by the European energy crisis still forms a strong support for aluminum prices. On the cost side, the price of raw materials has changed steadily this week, and the gross profit of the industry has expanded to 4394 yuan / ton. it is recommended to pay attention to the electrolytic aluminum enterprises that have lost money and made a reversal in profits. SHFE copper fell 30.6% to 71460 yuan / ton this week, and the Fed's expectation of raising interest rates in March was fully priced in copper prices. Higher-than-expected inflation in the United States and Chinese financial data continued to support copper speculation and real demand, driving copper prices up to around 72000 yuan per ton. However, low inventory led to the end of pre-delivery squeeze, copper prices returned to very low inventories and off-season demand fell back in the game, market trading also gradually turned to the recovery of demand after the year, so we believe that the short-term supply and demand fundamentals to maintain a tight balance is difficult to break, copper prices will still fluctuate in the range of 70000 yuan / ton, focusing on tracking the transition of the off-peak season after the Lunar New year.
Lithium prices are up more than 10% a week. This week, the price of lithium carbonate in Wuxi plate fell 6% to 365000 yuan / ton, Baichuan industrial carbon and electric carbon prices rose 11.9%, 11.6% to 31.05 yuan and 335400 yuan / ton, lithium hydroxide rose 10.2% to 269400 yuan / ton, spodumene price rose 3.9% to 2675 US dollars / ton, lithium price continued to accelerate. The supply of lithium concentrate is still tight, the operation of major lithium carbonate factories is stable, and the start-up of small plants is not good due to raw material end restrictions. Most lithium hydroxide manufacturers still suspend external quotations, the supply of industrial-grade lithium hydroxide that can be used to produce lithium carbonate by carbonization process is difficult to find, and the consumption of battery-grade lithium hydroxide inventory is obvious. Superimposing the factors that some manufacturers have entered the phase of shutdown and overhaul near the Spring Festival, this week, the operating rates of lithium carbonate and lithium hydroxide dropped 3.4%, 3.7% to 38.73% and 51.74%, respectively, and output dropped 3.4%, 3.7% to 3509 and 3595 tons, respectively, and inventories decreased 2.29% and 5.12% to 5081 and 371 tons respectively. On the demand side, according to the China Automobile Association, China's production and sales of new energy vehicles in December were 51.8 and 531000 respectively, an increase of 120% and 114% respectively over the same period last year, and an increase of 13% and 18% month-on-month. The annual production and sales volume were 353.3 and 3.507 million respectively, an increase of 170% and 165% respectively over the same period last year. At the same time, according to the passenger car Association, sales of new energy vehicles in China are expected to exceed 6 million units in 2022, an increase of about 70% over the same period last year, with a penetration rate of 22%. We expect that the shortage of lithium resources will be accelerated by the accelerated expansion of mid-stream links such as cathode material factories and battery factories, as well as continued strong sales of new energy vehicles throughout 2022, and lithium prices will be supported by high lithium prices, and lithium resources companies will face a revaluation. It is suggested to focus on undervalued enterprises or enterprises with marginal growth of lithium resources that are rich in lithium reserves and benefit from rising lithium prices.
The price of rare earths remains stable and the cost continues to be transmitted downstream. This week, neodymium oxide and metal neodymium rose 10, 000 / ton to 1.025 million / ton and 1.25 million / ton respectively, while NdFeB blank rose 3000 / ton. The shortage of rare earth oxides intensified at the end of the year, and lock-up orders from magnetic manufacturers pushed up rare earth prices. Stocks in the lower reaches of the week are basically over and trading in the market is light. There is no sign of improvement at the upstream mine end in the short term. Before the issuance of the first batch of rare earth mining quotas in 2022, we expect that rare earth prices will still be strong, and magnetic material factories have undergone full cost stress tests. middle and high-end products gradually achieve smooth cost transmission to the lower reaches.
CPI upward superimposed interest rate hike reiterated that precious metals maintained a range of shocks. SHFE gold price rose 1.2% to 372.38 yuan / kg, SHFE silver rose 3.2% to 4761 yuan / the real yield on kg, 10-year Treasury bonds rose 6pct-to 0.66% SLV SPDR gold position 976 tons, SPDR silver position 16400 tons, basically the same as last week. Us CPI rose 7 per cent in December from a year earlier, the biggest increase since June 1982, as high inflation lifted precious metals prices out of the haze of last week's accelerated rate hike, but over the weekend the Fed once again stressed that interest rates were raised early and December PPI was lower than expected, upward pressure on prices eased slightly, and precious metals prices fluctuated downwards. At present, precious metal prices are still suppressed by the Fed's expectation of raising interest rates, but 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 suggested that we should continue to pay attention to the monetary policy of various countries and the pace of Fed interest rate increases.
Investment suggestion: in the context of the "double carbon" goal, pay attention to the historic investment opportunities of new energy and new materials, focus on new energy metals (lithium, cobalt, nickel, rare earth) with strong demand and weak supply pattern, and new metal materials that benefit from industrial upgrading and domestic substitution. Lithium suggests paying attention to Tianqi Lithium Industry, Ganfeng Lithium Industry, Yongxing material, Shengxin Lithium Energy, etc.; New Materials suggest paying attention to Homei New Materials, Power Diamond, Hesheng shares, Quartz shares, Bowei Alloy, Chujiang New Materials, etc. Titanium suggests paying attention to Bao Ti shares, Anning shares, etc.; Precious Metals suggest paying attention to Chifeng Gold, Yintai Gold, Precious Research Platinum Industry, etc. Industrial metals suggest to pay attention to cloud aluminum shares, Shenhuo shares, Western Mining, Zijin Mining, Lizhong Group, Suotong development and so on.
Risk factors: lower-than-expected decline in downstream demand, a shift in supply-side constraint policies, less-than-expected domestic liquidity easing, higher-than-expected liquidity tightening in the United States, a sharp fall in metal prices, and so on.
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