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Non-ferrous Metals Industry Weekly report: persistent concerns remain that commodity prices deviate further from stocks [institutional review]
Jan 24, 2022 14:44CST

[key words of this week]: the epidemic in South America has intensified, and the expansion of the salt lake has continued to be delayed; Argentina, Bolivia and Chile are planning to establish an organization of lithium producing countries, and the "OPEC" lithium mine is about to emerge; the unit price of lithium concentrate reached US $2500 / ton in the first quarter of Cattlin; and the production of praseodymium and neodymium oxide in Lynas increased by 8% in the fourth quarter compared with the previous quarter.

Market review: 1) in terms of small metals, domestic sales of new energy vehicles hit a new high in October, the penetration rate of new energy passenger vehicles is close to 20%, the prosperity of the industry continues to rise, and the upstream cobalt, lithium and rare earths of new energy vehicles have a clear trend. Continue to be optimistic: 1 the inventory of lithium ore in the industry is low, the upstream sentiment is obvious, and the price is accelerating. This week, the lithium concentrate rose 10.0% from the previous month, and the battery-grade lithium carbonate rose 10.1% from the previous week. The price of electric carbon has exceeded 350000; 2 the outbreak of the epidemic in South Africa, cobalt prices accelerated upward, metal cobalt rose 0.6% this week in terms of rare earths, raw materials continued to be tense, downstream enterprises at the end of the year to increase demand, praseodymium neodymium oxide quotation rose 2.5% this week. 2) supported by the expectation of further domestic easing policy, the price of base metals has risen, while the volatility of global stock markets has risen sharply, the spread of panic in financial markets, and the rise in oil prices have made safe-haven assets more attractive: 1 basic metals, LME aluminum and copper rose 1.2% and 2.1% respectively; The real yield on 2-year US Treasuries ranged from-0.66 per cent to 0.59 per cent, while COMEX gold closed at 1831.8 US dollars per ounce, up 0.84 per cent from the previous month. 3) A shares fell back as a whole this week, and the Shenwan Nonferrous Metals Index closed at 5377.22 points, down 2.82% from the previous month, outperforming the Shanghai Composite Index by 2.86%. The rise and fall of gold, industrial metals, rare metals, metal and non-metallic new materials were 0.83%, 0.18%,-4.94% and-7.50%, respectively.

The macro "three factors" sum up: the policy direction of domestic steady growth is clear, and the central bank cuts policy interest rates for the first time in the past two years; the number of quarterly adjustment years for new housing starts in the United States has rebounded in December, and the epidemic has cooled somewhat; CPI in the euro zone has rebounded in December compared with the same period last year, and the epidemic is heating up. Specifically: 1) in China, GDP fell in the fourth quarter compared with the same period last year, and industrial added value rebounded in the same month. China's GDP in the fourth quarter was 4.0% year-on-year (the previous value 4.9%, expected 3.74%). In 2021, GDP increased by 8.1% over the previous year, and the two-year average growth was 5.1%. Domestic industrial added value in December was 4.3% (previous value 3.8%, expected 3.68%); The total amount of fixed asset investment completed in December was 4.9% year-on-year (previous value 5.2%, expected 5.0%), of which the manufacturing industry accumulated 13.5% year-on-year (previous value 13.7%); total retail sales of consumer goods in December were 1.7% year-on-year (previous value 3.9%, expected 3.79%). 2) in the United States, the quarterly adjustment of private housing starts in December rebounded. In the United States, 120300 private housing units were started in December (the previous value was 128900 units), and 170.2 million private housing units were started in several quarters (with a previous value of 1.678 million units and expected 1.66 million units). The total number of construction permits in the United States in December was 1.873 million (previous value 1.717 million, expected 1.701 million), 9.4% month-on-month (previous value 3.9%). This week, 286000 first-time claims for unemployment benefits were disclosed, up 55000 from the previous month. 3) the euro area CPI rebounded year-on-year in December and the epidemic increased. The euro zone ZEW economic climate index in January was 49.4 (previous value 26.8, expected 29.2), and EU CPI in December was 5.3% year-on-year (previous value 5.2%). In December, eurozone CPI month-on-month compared with 0.4% (previous value 0.4%, expected 0.4%), year-on-year 5.0% (previous value 4.9%, expected 5.0%), core CPI 0.4% (previous value 0.0%), core CPI 2.6% year-on-year (previous value 2.6%). In the UK, Germany and France, there were 569532.0 new daily confirmed cases of novel coronavirus this week, an increase of 88196.8 cases compared with last week, and the epidemic is heating up. 4) the rhythm of each economy is different, but the overall global economy is falling in the same direction, with a global PMI of 54.3 in December, rising 0.5 per cent.

Basic metals: domestic policy easing is expected to heat up, basic metal prices are expected to rise, international oil prices hit a seven-year high under fears of oil and gas supply outages in Europe, tin and aluminum prices also rose strongly stimulated by demand and production restrictions, and other basic metal prices rose; the domestic central bank cut policy interest rates for the first time in nearly two years, supported by expectations of further easing in China, and base metal prices rose. Specifically, LME copper, aluminum, lead, zinc, tin and nickel rose and fell by 2.1%, 1.2%,-0.8%, 3.2%, 7.2% and 8.7% respectively this week.

1. For electrolytic copper, when there are not many opportunities for import price comparison during the week, some of the goods are accumulated in the bonded warehouse, and the domestic bonded area accumulates continuously; before the Spring Festival, the overall market consumption is not optimistic, and the demand is sluggish and the turnover in the foreign trade market is light. This Wednesday, the stock of electrolytic copper is 84000 tons, with a weekly accumulation of 600 tons.

2. For electrolytic aluminum, on the supply side, some electrolytic aluminum in Yunnan, Qinghai and other places have resumed production slightly this week, and the overall domestic supply has risen slowly; on the demand side, downstream processing enterprises have had holidays one after another, and demand is in the doldrums. Affected by the rise in thermal coal prices this week, the immediate cost of electrolytic aluminum was 17836 yuan / ton, up 4.27% from the previous month, and the profit per ton of aluminum was 2326 yuan, down 13.59% from the previous month. This week, the total inventory of aluminum ingots in the eight places in China is 726000 tons, with a weekly accumulation of 2000 tons.

3. For zinc ingots, overseas, the geopolitical problems have not been solved, and there is no further news on whether Beixi No.2 is passed or not, and the European electricity price also continues to fluctuate this week, and the logic of short-term electricity price will not end. In terms of zinc in Shanghai, the lower reaches of the festival have entered the holiday shutdown period one after another. at the same time, due to the upstream price of zinc exceeding 25000 yuan / ton this week, the purchasing willingness of downstream enterprises has obviously weakened, the pre-festival reserve stock has officially entered the end, and inventory has increased month-on-month this week. This week, the total inventory of zinc ingots is 133600 tons, with a weekly accumulation of 10500 tons.

Upstream lithium electricity raw materials: the prosperity of the global new energy industry continues to rise, the electric vehicle market in China, the United States and Europe resonates, and the upward trend of upstream raw material prices continues to strengthen:

1. The demand boom continues to rise, and the price transmission is smooth: domestic production and sales of new energy vehicles exceeded 3.5 million in 21 years, an increase of 1.6 times over the same period last year, and the market penetration rate was 13.4%, of which the number exceeded 500000 in December.

2. The price of lithium carbonate has accelerated again. 1) on the price side, battery-grade lithium carbonate is up 10.1% from last week, battery-grade lithium hydroxide is up 10.6% from last week, spodumene is up 10% from last week, and Mt Cattlin Mine expects the unit price of 22Q1 lithium concentrate to reach $2500 / ton. 2) on the supply side, domestic smelters have entered the period of centralized maintenance at the end of the year, the outbreak of the epidemic in Chile and Argentina, supply at home and abroad may be reduced from spot, upstream bullish sentiment is obvious; 3) Lithium carbonate inventory, lithium carbonate inventory from 5081 to 4996 tons, reduced by 1.67%; lithium hydroxide inventory from 371,366 tons, decreased by 1.35%. 4) overseas lithium resources, outbreaks in Chile and Argentina, the expansion of overseas resources continued to delay the commissioning of, Sal de Vida Salt Lake from the second half of 22 years to 23 years, and it may become a common phenomenon for projects under construction to be put into production. In addition, according to the Rio Times, a Latin American media, Argentina, Bolivia and Chile are discussing the establishment of an organization of lithium producing countries, and the lithium mine "OPEC" is about to emerge.

3. With the tightening of raw materials, the price of cobalt may go up further. 1) on the price side, the quotations of MB cobalt (standard grade) and MB cobalt (alloy grade) rose 0.4% and 0.4% respectively, while domestic metal cobalt and cobalt sulfate rose 0.6% and 0.5% respectively. 2) on the supply side, China's imports of cobalt raw materials in December 2021 totaled 8735 metal tons, an increase of 3.96% from the previous month and a decrease of 10% over the same period last year; in 2021, China's total imports of cobalt raw materials totaled 91100 tons, an increase of 2.79% over the same period last year. According to the feedback of the industry chain, the uncertainty of the shipping date will last at least until the first quarter of 2022.

4. Rare earths: raw materials continue to be tense, and downstream enterprises prepare goods at the end of the year to increase demand. Praseodymium and neodymium oxide quotations rose slightly by 2.5% this 1) in the spot market, domestic praseodymium and neodymium oxide prices rose 2.5% to 928,000 yuan / ton compared with last week; for medium and heavy rare earths, dysprosium oxide and terbium oxide increased 0.3% and 1.6% compared with last week. 2) Myanmar mines, imports of 5093 tons of REO, in December increased significantly compared with the previous month, mainly due to the resumption of imports of Myanmar mines in mid-late November, the early backlog of rare earth ore inventory clearance, Myanmar mine imports have been closed again due to the epidemic; 3) US mines, imports in December 4173 tons (reduced REO about 2504 tons), a month-on-month decrease of 69%, mainly affected by the customs clearance cycle; 4) in terms of inventory, the stock of praseodymium and neodymium oxide decreased by 1.29% from 2490 to 2458 tons.

5. Nickel: the price reached a new high in recent 10 years. 1) Nickel prices continued to hit a new 10-year high, with SHFE nickel closing at 176700 yuan / ton, up 7.73% from the previous month. 2) on the supply side, Indonesia intends to impose a tax on Ferro-nickel, and the government may begin to tax exports of ferronickel and nickel pig iron in 2022. If the price of nickel is more than US $15000 / ton, a tax of 2% may be levied, and the tax will increase with the increase in the price of nickel. The Indonesian government has expressed the idea of levying taxes many times before. Myanmar Dagong Mountain Nickel smelting Project Power Plant was bombed and suspended production, with an annual production capacity of 85000 tons of FeNi.

Investment advice: maintain the "overweight" rating of the industry

1. Basic metals, China's economic work in 2022 will set the tone of "stable word first", which will provide a certain support for the prices of basic metals, but from the global dimension, 1) the structural changes before, during and after the epidemic of overseas economic demand, and 2) the trend of global liquidity taper remains unchanged, and the downward trend of basic metals may not have been fundamentally changed.

2. The upstream raw materials of new energy, such as lithium, cobalt, rare earth, copper foil, aluminum foil, etc., are still strong in the short cycle, and the general direction of the medium-and long-term three-year upstream cycle will not change, and the industrial boom is the most clear and firmly optimistic.

Core targets: 1) New Energy vehicle Industry chain: Ganfeng Lithium Industry, Tianqi Lithium Industry, China Mineral Resources, Yongxing Materials, Yahua Group, Huayou Cobalt Industry, Luoyang Molybdenum Industry, Northern rare Earth, Shenghe Resources, Zhenghai Magnetic Materials, Jinli permanent Magnet, Dadixiong, Dingsheng New Materials, Norde shares, Jiayuan Technology and so on. 2) basic metals: Yunnan Aluminum Co., Ltd., Shenhuo Co., Ltd., Tianshan Aluminum Industry, Suotong Development, Zijin Mining, Tongling Nonferrous, etc. 3) Precious metals: Shandong gold, Shengda resources, etc.

Risk hints: macroeconomic fluctuations, import and environmental protection policy risks, gold price fluctuation risks, new energy vehicle sales less than expected risks, supply and demand assumptions less than expected risks, and so on.

Non-ferrous metals

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