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Rising like a rainbow! The abnormal movement of the colored plate? What are the fundamentals of the upsurge of optimism?
Jul 10,2020 09:49CST
translation
Source:Futures daily
Under the fermented optimism, the non-ferrous metal plate has risen in turn recently, showing a scene of prosperity. At present, Shanghai copper has reached a 16-month high, standing above the 50000 yuan / ton mark; Shanghai aluminum continues to climb strongly, and aluminum prices return to the 14000 yuan / ton line; and Shanghai zinc has risen strongly in the past two days, breaking through the 17000 yuan / ton mark.
The content below was translated by Tencent automatically for reference.

SMM News: zinc prices are strong to make up, followed by weak uplink?

After a strong rally on Wednesday, the 2008 contract of Zinc in Shanghai rose as high as 17650 yuan / ton on Thursday, the highest since Feb. 7, and closed at 17540 yuan / ton on the day, an increase of 4.37%, firmly holding the "C position" of the day's rise.

The news shows that the loading and unloading arm of a barge at the (Red Dog) loading port of Tektronix Resources' Honggou Zinc Mine broke down on July 3. Affected by this, the shipping period of Honggou Mine has been postponed. It is expected that one barge will be shipped in seven days and the other will take four weeks to repair. It is understood that the output of Honggou zinc mine and lead mine in 2019 is 553000 tons and 103000 tons respectively, and is expected to be 500000-535000 tons and 95000-100000 tons respectively in 2020. Overseas shipments are mainly to South Korea and European countries. Citic Futures Nonferrous researcher said that under the catalysis of the delayed shipment of Honggou Mine, domestic and foreign zinc prices strongly broke through the important pressure level, breaking through the 17000 yuan / ton and 2100 US dollars / ton mark respectively.

Zeng Tong, a researcher at Jinrui Futures, told Futures Daily that the main reason for the sudden surge in zinc prices was the twists and turns in the resumption of production and regeneration of overseas zinc mines, in addition to problems in mine transportation and the recurrence of a superimposed epidemic crisis, causing the market to worry about the pace of recovery of zinc mines, thus triggering market expectations of a complete reversal of the zinc balance.

In addition to the promotion of the news side, the recent surge in zinc prices is also related to the pick-up of macro sentiment. " Guoxin Futures Nonferrous Research team believes that, driven by the better-than-expected employment data in the United States and the sharp rise in A-shares, risk appetite in the capital market has rebounded sharply, and varieties that are positively related to the macro economy have rebounded. At the same time, recent domestic infrastructure policies are also boosting market confidence. On July 8, 12 departments, including the National Development and Reform Commission, the Ministry of Finance, the Ministry of Housing and the Ministry of Transport, issued the implementation opinions on supporting private enterprises to participate in the construction and development of transport infrastructure. The team said that because of the great impact of the epidemic on the economy this year, in the context of the impact on exports and consumption, the policy has a clear direction to boost the economy of infrastructure construction. Zinc, as the most relevant species of non-ferrous metals, has benefited a lot.

To sum up, the research and analysis of CITIC Futures Nonferrous team said that due to the warming of the macro atmosphere and the increase in market risk appetite, stimulated by the delayed shipment of zinc mines, short-term improvement in zinc supply and demand, coupled with good financial cooperation, has led to a strong rise in zinc prices in recent days.

It believes that, driven by strong infrastructure and stable real estate, the performance of domestic consumption is still relatively considerable at the present stage, with flooding in the south temporarily restricting demand, while countries such as Europe and the United States have strong stimulus policies, and overseas consumption will gradually recover. At the same time, the start-up of zinc smelting end continues to be limited, the inflow of imported zinc slows down, the demand for rigid replenishment in the downstream continues, and the trend of domestic zinc ingot inventory has not changed. Therefore, at present, with the good cooperation of funds, it is expected that the short-term strong pattern will continue. However, in the medium term, the recovery of zinc supply is expected to heat up, and zinc prices are expected to oscillate under the weakening margin of supply and demand.

From the perspective of the medium cycle, Zeng Tong believes that the zinc accumulation pool will be cashed in the first half of the year, and the global market pattern in the second half of the year will be only slightly excess, and the contradiction between supply and demand pattern of the zinc market is not strong. In terms of consumption, from the perspective of capital construction, both the approval of funds and the number of projects have maintained a relatively good pace, and zinc consumption will maintain the current growth level under the support of infrastructure in the second half of the year. On the supply side, through the investigation of domestic refinery production in the third quarter, it is found that the Q3 smelting output is less than market expectations, or make the zinc market maintain a stable de-stocking level in the third quarter, thus laying the groundwork for the import demand after the return of the consumption season.

In the long run, Guoxin Futures Nonferrous team believes that zinc market fundamentals are expected to be revised. Due to the significant impact of the epidemic on the mine end in 2020, according to statistics, the mines of overseas groups have produced a reduction of nearly 400000 tons at present. At the same time, due to the impact of the epidemic on cash flow, some investment plans have run aground, while the low zinc price lacks profit-driven. Some newly built and expanded mines have been delayed. The team expects the zinc market to return to tight balance in 2020, while the previously estimated large surplus in zinc mines is likely to be delayed beyond next year, suggesting that current zinc pricing needs to be revised by the market.

However, in the short term, the team believes that the zinc market has not yet found a reason for a complete reversal, and there is a risk of rising and falling in the future. The main reason is that the zinc market has entered the off-season of traditional consumption, while the upstream supply pressure is rising with the repair of domestic and foreign mines, the floating of processing fees in July and the return of smelter inventory to the normal level also indicate that the original mine end is being relaxed. Therefore, there is not enough kinetic energy for zinc prices to continue to rise in the short term, and macro-uncertainty may magnify the volatility of zinc prices. It is suggested that we should look more and control risks less.

Hou Jing, a metal analyst at Shanghai Stock Exchange Futures, believes that at present, zinc fundamentals as a whole do not support zinc prices to continue to rise, and the probability of zinc prices falling from high levels in July is on the high side. The main reasons are as follows: first, the processing fee has been low for a long time, profit repair stimulates domestic and foreign mine end to resume work and production, the raw material inventory of smelters is sufficient, and the supply pressure is on the high side; second, the number of enterprises resuming production in July is much higher than that of maintenance enterprises, and it is expected that processing fees will pick up, profits will tilt to the smelting end, and zinc refining capacity will increase significantly. Third, the export order volume dropped sharply, superimposed in the off-season of traditional consumption, consumption weakened, inventory situation may enter the accumulation cycle. She suggested that investors should pay close attention to the maintenance of the smelter to judge the trend of zinc price.

The strength of Shanghai Copper has not changed, where to go after 50000 points?

Shanghai copper, which has recently reached record highs, continued its strength, breaking the 50000 yuan / ton mark in intraday trading on Thursday, reaching a maximum of 50800 yuan / ton, a 16-month high, and LME copper futures also hit a more than one-year high.

The continuous disturbance of the epidemic situation to the mine has become an important "catalyst" for the price of copper. Chile's Codelco, the world's largest copper producer, said on Wednesday that nearly 3000 workers had been infected with the new crown virus. Copper prices continue to rise as the epidemic in South America spirals out of control and fears of tight supply keep rising.

The recent continued strength of Shanghai Copper has also been boosted by macro optimism. According to the National Bureau of Statistics, China's CPI rose 2.5% in June from a year earlier, down 0.1% from a month earlier and 3.0% from a year earlier, up 0.4% from a month earlier. The decline in PPI narrowed, indicating that demand continued to pick up, domestic infrastructure and manufacturing demand gradually recovered, and market expectations for copper demand remained optimistic, boosting market confidence.

From a fundamental point of view, according to SMM research, China's electrolytic copper production fell by 1.42% to 759200 tons month-on-month in June, and domestic electrolytic copper production is expected to continue to decline by 2.79% to 738000 tons in July 2020. Supply tension and concern remain, providing momentum for the rise in copper prices.

"at present, the macro atmosphere is still warm, and the supply side has been greatly disturbed by the resurgence of the new crown pneumonia epidemic in the Americas, so at present, both inner and outer copper prices are showing a relatively strong trend." Huatai futures research team said. Unlike last week, at a time when copper prices continue to rise, holders have not taken the initiative to lower the discount price because of rising prices, which still makes the price stable and firm, which fully reflects the market's optimism about copper prices in the future.

Overall, Maike Futures Research said that due to the massive removal of refined copper from the warehouse and the increase in the supply of scrap copper since June, the structural tension of refined copper, the widening of the price difference between refined copper and scrap, and the slowdown in the removal of refined copper, but the inventory has been low for several years. The rising water structure inside and outside is the current basic contradiction, coupled with serious supply concerns, copper prices remain strong against the backdrop of the flooding of macro liquidity and the rapid recovery of the economy from the previous month. In the short term, the Shanghai copper callback can still be bought in the short term.

The non-ferrous research team of Jinrui Futures Research Institute said that at present, domestic consumption has entered the off-season, especially under the impact of import sources, the output of inventory has obviously declined and is not as good as the level of the same period in previous years, while overseas continues to pick up month-on-month due to the recovery of manufacturing. When the economic data perform well, the follow-up policy depends on the sustainability of the economic recovery. From a fundamental point of view, overseas relay China to support demand, although hindered by the rebound of the epidemic in the United States, but the mine side interference impact is greater, the fundamental support is strong, copper prices are expected to continue to oscillate at high levels.

"as copper prices continued to soar in July, Lun Copper has returned to its pre-epidemic level, and Shanghai Copper has also soared to the 50, 000-point dividing line between cattle and bears." Zhang Tianyi, a non-ferrous metals researcher at Hongye Futures, believes that the short-term sentiment in the Shanghai copper market is still very optimistic and may continue to be strong in the following week, continuing to test and rise at the 50000-point key level. However, the medium-and long-term market still faces greater uncertainty, with the continuation of the global epidemic, the off-season at the domestic spot end and concerns about mine production in South America all likely to significantly destabilize copper prices.

Aluminum price returns to 14000 yuan / ton level, can you continue to catch up?

"this round of aluminium prices are rising amid scepticism because the pressure on the supply side is obvious, while the strong performance of the consumer side is better than expected." Yu Feifei, the research team of Jianxin Futures Industry, said that Shanghai Aluminum made a "golden pit" under the influence of the epidemic in the first half of the year, but now it has basically digested all the factors of the epidemic, and the performance of the aluminum market will return to stability in the second half of the year.

At present, the average complete cost of the electrolytic aluminum industry is about 12400 yuan / ton. according to historical data, if analyzed only from the perspective of cost, the reasonable price of Shanghai aluminum is about 13500 yuan / ton. the fluctuation range of Shanghai aluminum is 14000 yuan / ton. At present, the average profit of electrolytic aluminum industry is close to 2000 yuan / ton, which is at an all-time high. Therefore, Yu Feifei believes that it is not appropriate to continue to pursue more from the perspective of cost valuation or profit at this stage.

However, she said that market prices are affected by many factors, including continued promotion at the financial level, loose liquidity in the macro market, and the possible continuation of the consumption boost by the construction and pharmaceutical industries under policy stimulus, and so on. More importantly, the current spot inventory level of about 700000 tons of electrolytic aluminum is also at a historically low level, so there is a great risk of shorting.

"from an operational point of view, the current aluminum price is running above 14000 yuan / ton, basically returning to the operating range for the whole of last year." In the short term, Yu Feifei said to maintain a cautious and strong point of view, the upper pressure level can in turn focus on 14200 yuan / ton, 14500 yuan / ton level. In view of the accelerated supply recovery in the second half of the year and the diminishing marginal utility of demand growth, we can consider combining aluminum ingot inventory and spot price changes before looking for short selling opportunities.

Sun Weidong, a non-ferrous researcher at the East Securities Derivatives Research Institute, believes that as aluminum prices gradually return to 14000 yuan / ton, the profits of the industry have risen to an all-time high, and it is not appropriate to chase more from the perspective of valuation or profit-loss ratio. In the medium term, although supply pressures will increase in July, there is no doubt that there is a greater risk of shorting when inventories are relatively low in history, and he suggests that it is better to wait and see. Supply pressure will increase significantly after August, at this time can be combined with aluminum ingot inventory and spot up water changes to find signs of weakening fundamentals before the empty order layout. He believes that the operating range of the main contract price of Shanghai Aluminum in the second half of the year is 14,500 yuan / ton.

From a cost point of view, the bottom is currently confirmed, but the room for rebound is limited. With the increase of consumption, the probability of alumina price rebound is larger, but due to the pressure of new and reproduction capacity and the potential impact of imported alumina, the rebound height of alumina price in the second half of the year is relatively limited, which is expected to run between 2200 and 2500 yuan / ton. The cost of electrolytic aluminum is expected to rebound in the second half of the year, but to a limited extent.

From a supply point of view, the supply bottleneck was broken and the pressure on primary aluminum supply increased in the second half of the year. At present, the profits of the electrolytic aluminum industry are at an all-time high, and the release of additional capacity is expected to accelerate. According to the pace of production, the annual output of electrolytic aluminum is expected to be 37.43 million tons, a year-on-year increase of 3.5%. Among them, the pace of putting new capacity into production has accelerated significantly after July, and the pressure on the supply side of primary aluminum will increase significantly in the fourth quarter.

From the consumer side, domestic consumption rebounded at the bottom and is expected to continue to improve in the second half of the year. The real estate completion cycle in the second half of the year will still be the main force to boost primary aluminum consumption, cars and cables will perform better in the second half of the year than in the first half of the year, and the recovery of major consumption areas downstream will provide support for the growth rate of domestic electrolytic aluminum consumption in the second half of the year. In addition, due to the serious decline in aluminum export profits, exports are under greater pressure in the second half of the year, and the average monthly export volume is expected to remain below 400000 tons. Taken together, the growth rate of primary aluminum consumption for the whole year is expected to be-0.3%.

"it should be noted that although the import volume of aluminum ingots in the first half of the year is very limited, it is difficult to have an impact on the market, but if the Shanghai-Lun ratio is high for a long time and the import window continues to open, it will still be impacted by a certain scale of imported aluminum ingots during the year. We need to be vigilant. Under the mismatch between supply and demand, the marginal utility of the recovery of consumption from the bottom on prices is more significant, while the marginal utility of stable demand after the recovery of the market will be greatly reduced, so it is necessary to guard against the changes brought by downstream demand to the supply and demand of the aluminum market in the future. " Yu Feifei hint.

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