The rise in global risk premiums from recovery trading continued to ferment during the week. As we said last week, with the weakening of the dollar exchange rate and nominal interest rates on US bonds, the market has repriced recovery and inflation. During the week, the strong economic data released by China and the United States matched and confirmed the consistent repair of global manufacturing PMI and economic data (economic recovery and rising inflation expectations), superimposed loose remarks by central banks (systematic reduction in bond purchases is still far away), and contributed to a strong rise in risky assets (such as US stocks hit an all-time high). During the week, US dollar and US bond yields fell again, hitting March 18 and March 11 lows, respectively, and the pricing disturbance to risky assets caused by the previous disorderly volatility of US bond yields has weakened. Taking into account the high orders and high operating rates brought about by the seasonal industrial season in the Northern Hemisphere, while the supply chain has a bottleneck impact due to transport and capacity constraints, we believe that the second quarter is still the best stage for recovery transaction allocation. At a later stage, we need to pay attention to whether the market will enter re-inflationary trading.
Once again, it is strongly recommended to continue to seize the opportunity of gold asset allocation. We proposed several times on April 12, April 6, and March 14 that we should seize the excellent opportunity for the allocation of gold assets in the divergency. during the week, the gold price achieved the best performance in nearly 18 weeks under the huge differences in the previous market. The differences in the gold market have gradually begun to unify, that is, the resistance to rising gold prices is beginning to be less than the downward resistance. The KITCO survey of gold prices in the week of the 19th of this month shows that for the first time in history, 100 per cent of professional Wall Street investors are bullish on gold prices, while 65 per cent of ordinary investors are optimistic about gold prices, which fully shows a positive shift in investor sentiment and expectations towards the gold market. In addition, from a fundamental point of view, major Asian gold consumers are beginning to show positive demand signals against the backdrop of an average premium of $8 / oz for spot gold in Asia. China has begun to return to the gold market, with the latest news that the Chinese government has approved about 150 tons of gold to be shipped to China this month, the highest import in 2019. India, another big gold consumer, has also seen a marked rebound in demand for gold, as its gold imports in March also reached a record 160 tons (up 4.71 times). Considering that gold assets, as the most important risk aversion and value reserve assets of central banks, can effectively hedge the rising debt risks and inflation risks of various countries, we believe that the gold market will remain structurally strong for now, which will contribute to the healthy rise of gold prices. Liquidity premium, exchange rate premium and risk aversion premium in gold pricing will continue to return, and US dollar gold will return above US $2000 / oz this year, and we continue to strongly recommend seizing the opportunity to allocate gold assets under divergent market conditions. however, we need to pay attention to the impact of changes in US dollars and US Treasury yields on gold prices.
CME lithium hydroxide futures are coming online, lithium industry pricing model ushered in innovation. The Chicago Mercantile Exchange is expected to launch a lithium hydroxide futures contract on May 3, with cash delivery and pricing based on the assessment of the price of lithium in China, Japan and South Korea (cost + premium + freight). The minimum price change is 0.01 US dollars / kg. The launch of lithium hydroxide futures confirms (1) the significant expansion of lithium market scale and trading frequency; (2) the impact of lithium price on downstream industries is deep enough. At present, spot transactions are mainly zero orders, and there are obvious differences among different manufacturers / traders, different websites, and domestic and foreign quotations. The introduction of authoritative pricing mechanism helps to improve the fairness of lithium salt prices. Provide hedging tools for lithium salt and material manufacturers to stabilize performance fluctuations and stabilize the expectations of downstream battery and automobile companies on raw material costs. In terms of prices, the rapid upward trend of lithium concentrate remains unchanged, with quotations rising to US $630 / ton; export orders for high-nickel materials have increased, pushing up the average price of battery-grade lithium hydroxide by 2000 to 80,000 yuan / ton this week; and electric carbon has stabilized at 90,000 yuan / ton this week. however, the new production capacity in March-May may limit its future price upward space.
Inventory deregulation slowed, spot steel prices and profits were high. Due to the reduction in speculative demand, domestic steel consumption has declined this week, of which the weekly apparent consumption of rebar has dropped to 4.534 million tons (- 15400 tons), but it is still at the peak season level, and the demand for hot-rolled coil has dropped to 3.287 million tons (- 216300 tons). On the supply side, affected by the continuous suppression of production restrictions in Tangshan and the overhaul of some production lines, the output of the five major varieties of steel decreased by 74000 tons month-on-week, of which the hot coil decreased significantly (- 130000 tons), and the inventory of the five major varieties of steel narrowed to 1.305 million tons during the week. The continued high-speed elimination of inventory formed an effective support for the price of black goods, and the spot cost of steel lagged by three weeks during the week. The gross profit of steel was slightly improved (rebar + 52 to 663 yuan, hot coil + 43 to 969 yuan). Considering that the peak season demand will continue for some time, and the supply increment is limited by environmental production restrictions, the relationship between supply and demand will remain balanced in the short term, so that high steel prices and high profits can be maintained.
In the medium term, the area of new housing starts from January to March announced by the National Bureau of Statistics is 6.6% lower than that in 2019, and the March social finance data show that liquidity continues to shrink, which puts some pressure on the construction industry, which is highly dependent on credit. We need to pay attention to the downside risk of construction steel consumption, which reflects a high decline in forward contract profits in the market. It fell significantly this week due to the rebound in raw material prices (rebar-118,934yuan, hot coil-108to 1087 yuan).
In the week of the 19th, it is recommended to pay attention to the monetary policy meetings held by the Bank of Canada and the European Central Bank on Wednesday and Thursday, respectively. In terms of data, it is recommended to pay attention to the euro zone's April PMI economic outlook and inflation data for New Zealand, the United Kingdom, Canada and Japan.
The non-ferrous industry suggests to pay attention to Zijin Mining, Shandong Gold, Yintai Gold, Ganfeng Lithium Industry and Jiangxi Copper Industry; the iron and steel industry mainly recommends CITIC Special Steel, Fangda Special Steel and Tiangong International.
Risk tips: the dollar rebounded sharply, liquidity trading inflection point appeared, inventory growth and spot discount magnified, market risk sentiment accelerated decline.
