Recently, international commodity prices have been strongly highlighted by the superposition of multiple factors, especially the futures prices of non-ferrous metals nickel, aluminum and tin have risen by about 15%, 14% and 12% respectively in 2022, ranking first among the subdivisions of large categories of assets in the world.
Why the strong trend of commodities represented by non-ferrous metals, and whether there is room for growth in the future?
In response, Gu Fengda, head of Guoxin Futures Research and Consulting Department, told reporters that although commodities represented by non-ferrous metals are macroscopically subject to the adjustment and suppression of global monetary stimulus policies, the medium-and long-term structural support is still strong, especially in the context of increased prospects for economic recovery and geopolitical uncertainty in various countries, the real industry needs to increase replenishment in order to face the disturbance of global natural resources supply. At the same time, the demand side has accelerated growth in the transformation of the new energy revolution in major economies, promoting the industrial structure of supply and demand of non-ferrous metals represented by nickel, aluminum and tin to improve, prices rising strongly, and the center of gravity rising continuously.
From a macro point of view, Gu Fengda's analysis pointed out that on the one hand, the market is ushering in the rising expectations of overseas developed economies represented by Europe and the United States to raise interest rates under persistently high inflation; on the other hand, the fundamentals of global commodity supply and demand are strong and the price trend is strong, among which the CRB Commodity Index, which represents the global commodity trend, continues to hit new highs. This seemingly contradictory phenomenon may have something to do with the interest rate hike effect of commodities, which means that historical data show that commodities usually outperform other large categories of assets a year after the Fed raises interest rates. among them, highly cyclical products such as energy and metal materials tend to perform well.
In the field of commodities, Gu Fengda said that in recent years, with the intensification of the game of global geopolitical conflicts, the widening gap between the rich and the poor, and the rise of resource nationalism, some global natural resources exporters have begun to have more say in industrial chain pricing, but with the rise of resource nationalism and populism, there are more supply disturbances in the upper reaches of the commodity industrial chain, for example, Copper, zinc and lithium in South America, natural gas, aluminum and zinc in Europe under the energy crisis, iron ore in Australia, tin and nickel mines in Southeast Asia have all experienced supply disturbances and rising costs, all of which have had a great impact on the division of labor and the balance of supply and demand in the global industrial chain.
"although most of the non-ferrous metals have risen recently, the specific reasons for the rise of each variety are not the same." Xia Yingying, an analyst at South China Futures Metals, told Futures Daily that the rise in aluminum prices is closely related to geopolitics. Recently, Russian President Vladimir Putin announced the recognition of the independence of two regions controlled by civilian forces in eastern Ukraine, escalating the conflict between Russia and Ukraine and deepening market concerns about aluminum and natural gas supplies, which in turn pushed aluminum prices higher inside and outside the market.
"as Germany made it clear on Monday that it would suspend certification for the Nord Stream 2 project, the Dutch TTF natural gas contract rose more than 10 per cent, raising energy prices again or adding to cost pressure on aluminum smelters in Europe." Xia Yingying analysis said that in addition, Russia is the world's second largest primary aluminum producer and the largest aluminum exporter. Russian aluminum production accounts for about 6% of global primary aluminum production. In 2019, Russian aluminum primary aluminum and aluminum alloy exports were 1.9 million tons and 840000 tons respectively, accounting for 17.4% and 6.9% of the total global trade volume. If the 2018 incident of US aluminum sanctions against Russia is repeated, the global supply of aluminum ingots will be affected again in the short term.
"the main driver of the rise in nickel prices comes from the demand for stainless steel and new energy." Xia Yingying said that according to SMM data, 300 series stainless steel production rose 6% in January compared with the same period last year. Although there may be a slight decline due to the Spring Festival holiday in February, according to the communication with steel mills and traders, the production pace has not been greatly affected, and the demand support of nickel price is still there. The continuous heat in the new energy field has also played a more obvious role in promoting the price of nickel. The production expansion of the leading domestic new energy battery enterprises will be completed at the end of the first quarter and the second quarter, and the demand for raw material nickel is also gradually increasing.
Looking to the future, Gu Fengda said that in the recent stage, against the background of Russia promoting the escalation of the chaos in Ukraine and the brewing of a new round of comprehensive sanctions in Europe and the United States, the mood in the global financial market fluctuated sharply, and asset prices experienced multiple cycles of "panic and risk aversion, expected relaxation, and wait-and-see unrest". In fact, under the game between all parties, the geopolitical tension between Russia and Ukraine has spiralled, overseas macro and regulatory risk restrictions prices have risen too quickly in the short term, short-term non-ferrous prices will be obviously divided, and copper will be more adjusted to consolidate the underlying support. Aluminum and nickel are concerned that sanctions against Russia may trigger a pulsating rise under the supply shock. "when winter goes to spring, Nonferrous will have more momentum to rebound. It is suggested that processing enterprises should mainly lock in profit hedging and focus more on price differences and price comparison opportunities, while trend investors seize the opportunity of structural rebound in the market. Pay attention to fund management and risk control."
For aluminum, Xia Yingying said that the current global aluminum ingot supply shortage, especially overseas, the US Midwest, Europe spot water has reached $770 / ton and $465 / ton. In addition, the sanctions imposed by the United States on Rusal in 2018 also had a greater adverse impact on its own enterprises. After the sanctions were announced on April 6, 2018, the authorities announced on April 23 that they would consider reducing the sanctions, and formally announced the lifting of sanctions against Russian aluminum in January 2019. Combined with the current characteristics of the global electrolytic aluminum market and the lessons learned from the US sanctions against Lun Aluminum in 2018, Xia Yingying believes that there is little possibility that Europe and the United States will restrict Russian aluminum exports into the scope of sanctions, which will have little impact on the overall strength of aluminum.
For nickel, the price of nickel has risen by more than 15% since the beginning of 2022, making it the "bellwether" within non-ferrous metals. Taking into account the continued popularity of the demand side and the smoothness of rising prices, Xia Yingying believes that nickel prices will continue the upward trend, which has slowed down.
