Sustained high shock of base metals supported by cost and external demand [institutional review]

Key words of the week: Russian-Ukrainian relations show signs of easing, US non-farm data are strong, and the epidemic hits domestic downstream demand.

Market Review:

1. The March non-farm data in the United States were lower than expected but still strong. The domestic epidemic affected logistics and transportation, resulting in a decline in downstream demand: 1) basic metals, market concerns about the weakening of downstream consumption caused by the domestic epidemic led to a decline in copper and aluminum prices. LME aluminum and copper fell 5.1% and 0.1%, respectively. 2) the real yield on 10-year US bonds ranged from-0.47 per cent to 0.41 per cent. Gold in Comex closed at 1942.7 US dollars per ounce, down 0.59 per cent from the previous month, while SHFE gold closed at 396.26 yuan / g, down 1.35 per cent from the previous month.

2. This week, A shares rebounded as a whole, and the Shenwan Nonferrous Metals Index closed at 5286.53 points, down 1.97% from the previous month, outperforming the Shanghai Composite Index by 4.16 percentage points. Among them, the rise and fall of gold, industrial metals, rare metals, metal and non-metallic new materials were-1.24%,-1.30%,-2.65% and-2.73%, respectively.

The macro "three factors" sum up: China has made all-round efforts to stabilize growth, and Jin Wei will emphasize the prudent introduction of contractionary policies; the core PCE price index of the United States hit a record high in February compared with the same period last year, while the non-farm data in March was lower than expected but still strong; and the PMI in the euro area fell in March, and the epidemic increased.

Specifically: 1) China, the official manufacturing PMI fell in March, revealing this week that the official manufacturing PMI in March was 49.5 (previous value 50.2and expected 50.0), non-manufacturing business activity PMI was 48.4 (previous value 51.6), and March manufacturing PMI was 48.10 (previous value 50.40).

2) in the United States, the core PCE price index hit a record high in February compared with the same period last year. The core PCE price index in February was 5.40% (previous value 5.17%, expected 5.50%); manufacturing PMI in March was 57.10 (previous value 58.60), and March Markit manufacturing PMI quarterly adjustment was 58.80 (previous value 57.30, expected 56.30) The number of new non-farm payrolls in the United States in March was 431000 (750000 in the previous month, compared with an estimated 475000). 3) the initial value of PMI in March in the euro zone has fallen somewhat, and the epidemic has risen. This week, it was revealed that the euro area's March PMI was 56.5 (previous value 58.2%, expected 57.0), service sector PMI was 54.8 (previous value 55.5), EU unemployment rate was 6.2% (previous value 6.3%), euro zone unemployment rate was adjusted quarterly to 6.8% (previous value 6.9%, expected 6.7%). In Britain, Germany and France, an average of 500212.4 new COVID-19 cases were confirmed every day this week, an increase of 2311.2 cases over last week, and the epidemic is heating up. 4) overall, the global manufacturing sector recorded PMI53.4 in February, rising 2.0 from the previous month. However, judging from the above country-by-country manufacturing PMI data in March, the global manufacturing industry declined in March or has a high probability of events. Here we maintain the judgment that the global economy is entering a downward phase of the economic trend.

Precious metals: risk aversion moderated, non-farm data strong, gold prices under pressure during the week, Russia-Ukraine negotiations sent positive signals, market preference for risky assets rebounded, but the United States released strong non-farm payrolls data for March, driving the dollar and 10-year Treasury yields stronger, while inflation is high, market expectations of a positive Fed interest rate hike, gold prices are under pressure. As of April 1, COMEX gold closed at US $1942.7 / oz, down 0.59% at US $24.654 / oz, 3.75% at 396.26 yuan / g, 1.35% at 55038 yuan / kg and 3.80% at RMB 55038 / kg.

Basic metals: the European energy crisis supports metal prices, and during the week when the epidemic hit domestic downstream demand, Russia's decree on energy settlement in rubles continued to have a considerable impact on the market, and energy issues remained the key to supporting prices; but copper and aluminum prices have fallen, mainly due to market concerns about the weakening of downstream consumption caused by the domestic epidemic. Specifically, LME copper, aluminum, lead, zinc, tin and nickel rose and fell by-0.1%,-5.1%, 3.4%, 6.2%, 4.0% and-6.3% respectively this week.

1. For electrolytic copper, the market focuses on the impact of the domestic epidemic situation. In Jiangsu, Zhejiang and Shanghai, which is mainly in Shanghai, due to the impact of the epidemic, the logistics efficiency has declined seriously, and some downstream enterprises have been forced to reduce or stop production because of the shortage of raw materials, and the downstream demand has dropped significantly. But on the whole, the extent of removing the treasury in China is obviously faster than that in previous years. This Wednesday, the stock of electrolytic copper is 130000 tons, and the weekly warehouse is 10400 tons.

2. For electrolytic aluminum, the overall stable operation of the domestic supply side and the speed of resuming work and production of aluminum plants have been improved; on the demand side, due to the impact of the epidemic on downstream material transportation and production, downstream aluminum processing enterprises have been forced to reduce production and social inventory has accumulated. According to the immediate market price of raw materials, the price of alumina this week is 2966 yuan / ton, up 0.41% from the previous month, the cost of alumina is 2877 yuan / ton, up 0.20% from the previous month, and the gross profit per ton is 89 yuan / ton, up 7.73%. The anode price is 6198 yuan / ton, the month-on-month level is the same, the anode cost is 5813 yuan / ton, up 0.60% from the previous month, and the gross profit per ton is 384 yuan / ton, down 7.41%. The immediate cost of electrolytic aluminum is estimated at 17718 yuan / ton according to the immediate market price of raw materials, up 0.09% from the previous month. The spot price of electrolytic aluminum from the Yangtze River is 22720 yuan / ton, down 1.17% from the previous month. The profit per ton of aluminum is 3320 yuan, down 5.39% from the previous month. This week, the total inventory of aluminum ingots in the eight places in China is 1.041 million tons, with a weekly accumulation of 2000 tons.

3. For zinc ingots, overseas, the Russian law on energy settlement with rubles continues to have a considerable impact on the market, and the energy problem is still a strong support for the current rise in zinc prices; on the domestic side, the epidemic has a certain impact on the transportation of upstream and downstream enterprises, and various places are subject to varying degrees of transportation control, making it difficult for enterprises to replenish their raw material inventory, and enterprises in some areas have reduced production and stopped operation one after another. This week, the total inventory of zinc ingots is 272800 tons, with a weekly accumulation of 200 tons.

Investment advice: maintain the industry's "overweight" rating

1. Basic metals, China's economic work in 2022 is set to "stabilize the word first", and it is expected that subsequent stable growth policies will continue to be introduced to support confidence in the demand for basic metals, but from a global point of view:

1) structural changes of overseas economic demand before, during and after the epidemic.

2) the Fed has raised interest rates on the ground, but the subsequent tightening of overseas liquidity is expected to accelerate, suppressing demand for base metals. Looking for structural opportunities brought about by supply change in non-directional assets.

2. Precious metals, under the impact of oil prices and epidemics on the supply chain, overseas inflation data continue to rise and hit a new high in nearly 40 years, market concerns about inflation continue to rise, and precious metal prices are expected to continue to be supported.

Core target:

1) basic metals: Yunnan Aluminum Co., Ltd., Shenhuo Co., Ltd., Tianshan Aluminum Industry, Suotong Development, Zijin Mining, Tongling Nonferrous, etc.

2) Precious metals: Shandong gold, Chifeng gold, Shengda resources, etc.

Risk tips: 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.