[agency Review] Weekly report of the non-ferrous metals industry: the contradiction between supply and demand of lithium, cobalt and rare earths with a high increase in lithium and cobalt continues in November.

Lithium: domestic production and sales of new energy vehicles increased sharply in November compared with the previous month, and is optimistic about the continuity of high lithium prices. Battery-grade lithium carbonate rose 4.5% to 295 million yuan per ton this week. 1) the production and sales of new energy vehicles and the installed capacity of power batteries continued to increase sharply in November. According to data from the China Automobile Association, in November, the production and sales of new energy vehicles in China respectively reached 4.57 million, an increase of 1.2 times over the same period last year, and a month-on-month increase of 15% and 17%, which exceeded expectations.

Cumulative sales penetration increased to 12.7% from January to November. According to data from the Power Battery Alliance, a total of 9.2 GWhs were loaded with ternary batteries in China in November, up 57.7 percent and 32.5 percent respectively from the same month, while lithium iron phosphate batteries totaled 11.6 GWhs, up 145.3 percent and 37.2 percent respectively from the same month. 2) the contradiction between supply and demand has intensified, and it is optimistic that lithium prices will accelerate at the end of the year. On the demand side, December is the traditional peak season for Xinneng cars, superimposed near the New year, downstream manufacturers have a strong mood to prepare goods, and the demand is expected to continue to rise. On the supply side, the shipping schedule of overseas ports may be delayed due to the impact of holidays, the production of domestic salt lakes has been reduced seasonally, and some smelters have been overhauled at the end of the year. At the same time, some small factories are restricted by the insufficient operating rate of mineral sources, and the supply at home and abroad may be reduced. The supply gap will further increase, and prices may accelerate upward. 3) the lithium industry has a high degree of continuity or exceed expectations. On the demand side, the new energy vehicle industry chain has entered an era of endogenous growth, and demand pull has a strong explosive power; on the supply side, high-quality new mines are scarce, the future increment of resources is limited, and the industry supply order is better than the previous cycle. Industry leaders are cautious. In the next three years, the contradiction between supply and demand in the industry is prominent, supporting the long-term lithium price, the growth of local lithium resources with clear expectations is more prominent, and attach importance to the historical opportunity to reevaluate the value of local lithium resources. Related targets: Koda Manufacturing, Shengxin Lithium Energy, Rongjie shares, Tianqi Lithium Industry, Ya Hua Group, Jiangte Motor, Ganfeng Lithium Industry, Yongxing Materials, Zang GE Holdings, Tianhua Super Clean, China Mineral Resources, Tibet Mining, Tibet City Investment, etc.

Rare earths: the year-end indicators are tight and supply shrinks, and the contradiction between supply and demand may intensify. 1) on the supply side, the overall index is insufficient at the end of the year, there is a shortage of raw ore in the market, some separated enterprises reduce production, a few enterprises are limited by electricity at the same time, and the operating rate is reduced to less than 50%; some Sino-Burmese ports are opened, but factors such as the inability to export auxiliary materials and manpower shortage may still restrict the import of a large number of Burmese mines. 2) on the demand side, downstream merchants have a strong mood of replenishment before the Spring Festival. Therefore, in the short term, the contradiction between supply and demand may be further intensified, and the price of rare earths has sufficient momentum to rise. 3) in the long run, rare earths are at the starting point of a new era of reshaping supply and demand, and the valuation system is reconstructed.

The future of rare earths is expected to repeat the logic of the history of high demand for lithium-cobalt new energy, and its supply side is even better than lithium-cobalt, seizing the opportunity of revaluation of core assets with global pricing power. Related targets: northern rare earths, Minmetals rare earths, Baotou Steel shares, Shenghe Resources, Xiamen Tungsten Industry, etc.

Cobalt: the year-end replenishment cycle coincides with the worsening epidemic in South Africa and cobalt prices may continue to rise. 1) on the demand side, downstream battery material orders warmed up and superimposed the downstream restocking period before the Spring Festival, Xineng car at the beginning of 2022 may show a "off-season is not light" situation, procurement demand is supported; 2) on the supply side, visible supply increment is insufficient, Mutanda resumption progress and future production planning are lower than expected, superimposed the deterioration of the epidemic in South Africa.

This round of cobalt bull market is mainly driven by real demand, which is healthier than the previous round of cobalt price rise, and the industry boom is more sustainable, and related companies will continue to benefit. Related targets: Hanrui Cobalt Industry, Luoyang Molybdenum Industry, Shengtun Mining Industry, Hezhong Technology, Dow Technology and so on.

Risk hints: the risk of supply exceeding expectations, the risk of demand falling short of expectations, and the risk of policy change.