Zhongtai Securities: the rise of Synchronize, such as lithium, cobalt and rare earths, may just begin.

[key words]: Biden officially entered the White House; Lithium Cobalt rare Earth Price rose on Synchronize

Upstream lithium electricity raw materials: the prosperity of the global new energy industry continues to rise, the domestic and European electric car market resonates, sales in December exceed expectations, and the upward trend of upstream raw material prices continues to strengthen:

1. The demand boom continues to rise. 1) the driving force of the current electric vehicle market has completed the change from "policy-driven" to "endogenous drive of popular models", with obvious volume at 2C end. With the launch of popular models such as Tesla Model Y and Volkswagen ID.4 in the first quarter, sales are expected to show the characteristics of "not light in the off-season". According to SMM, the orders of domestic head battery enterprises in the first quarter of next year are expected to exceed those in the fourth quarter of this year, and the production schedule of the industrial chain will continue to increase. 2) sales of new energy vehicles in six European countries (Britain, France, Germany, Norway, Sweden and the Netherlands) totaled 198300 in December, up 220% from the same period last year, 56% from the previous month, and the penetration rate of electric vehicles was higher than expected; 3) in terms of 3C consumption, in November 2020, domestic smartphone shipments were 29.584 million, with a 13% month-on-month increase of 13% 5G mobile phone shipments to 20.136 million, and the penetration rate further increased to 68%. According to SMM, the production schedule of the electric vehicle industry chain continues to increase.

2. The price rise of lithium carbonate is sustainable. Last week, industrial-grade lithium carbonate rose 11.6%, battery-grade lithium carbonate rose 8.1%, industrial-grade lithium hydroxide rose 8.6%, and battery-grade lithium hydroxide rose 3.9%. 1) the domestic supply of battery-grade lithium carbonate is relatively tight, with large manufacturers full of orders and no excess inventory for sale; 2) the price difference between battery-grade lithium hydroxide and battery-grade lithium carbonate narrowed to-10587 yuan / ton, and the two prices are upside down. The rising trend of lithium carbonate prices is transmitted to lithium hydroxide; 3) Qinghai salt lake manufacturers have entered the winter production reduction period, lithium salt factory overhaul in the first quarter, domestic lithium carbonate production may decline; 4) Lithium concentrate continues to be tight. Cattlin produced 3.3 dry tons of lithium concentrate in the fourth quarter, with sales of 75000 dry tons of lithium concentrate, an increase of 349% month-on-month, sales of 70, 000 dry tons of Pilbara concentrate and an increase of 59% over the previous month. Lithium salt prices are expected to transmit to lithium concentrates.

3. It is only a matter of time before the price of cobalt rises. Last week, the metal cobalt rose 1.6%. MB cobalt rose 2.4%, and the cobalt discount coefficient increased to about 11% discount. 1) in December 2020, China imported 34337 physical tons of cobalt raw materials, equivalent to 9150 metal tons, an increase of 2% compared with the previous month, a decrease of 9% compared with the same period last year, the raw materials maintained a tight balance, and the discount coefficient of cobalt intermediate products rose to about 11% discount. Supported by cost, there is little profit space for cobalt smelters. 2) the demand side of the downstream continues to improve, driven by popular models, the new energy vehicle market in the first quarter shows the characteristics of "not light in the off-season", the production schedule of the industrial chain continues to rise, and the stock is ready for the Spring Festival, and the downstream inquiry gradually increases; 3) the renewed deterioration of the epidemic in Africa has raised concerns about the transport of raw materials, and the number of new confirmed cases in the Democratic Republic of the Congo (DRC) is also close to the high point in June. In order to prevent the epidemic, the DRC imposed a national curfew on December 16; at the same time, on December 30, epidemic prevention measures in South Africa were upgraded to a level III blockade, port capacity reduced, logistics and transport slowed, and cobalt raw materials further tightened.

4. Rare earths and permanent magnets have entered the stage of "simultaneous rise in quantity and price". On the supply side, the total quantity index control is implemented in China, the new increase in overseas mines is relatively limited, and the overall supply is relatively rigid, while on the demand side, the green economy, mainly new energy vehicles, frequency conversion household appliances, and wind power, continues to grow high, driving praseodymium and neodymium oxide in short supply, and prices continue to rise. Last week, domestic praseodymium-neodymium oxide rose 5.0% compared with last week, and the quotation of NdFeB N35 blank rose 3.0%. NdFeB magnets, as processed products of rare earths, may also enter the price increase cycle because of the shortage of raw materials.

5. The medium-and long-term industrial trend is more clear: 2019-2020 as the starting point, upstream materials such as cobalt, lithium, copper foil, aluminum foil and magnetic materials will enter the upstream of prosperity for 3 years. In particular, with the development of overseas new energy vehicles, the status of leading enterprises in the industrial chain is becoming more and more important, and the leading premium will become more and more obvious.

Basic metals: the upward trend of the economy has not changed, and the effects of off-season and liquidity changes are gradually emerging: the recovery of overseas demand + low inventory of industrial products + good expectations of vaccines, the active replenishment of industrial products continues, and the prices of major goods remain strong as a whole. LME copper, aluminum, lead, zinc, tin and nickel rose and fell 0.7%, 0.6%, 2.8%, 0.8%, 4.0% and 0.9% respectively last week.

1. For electrolytic copper, from a fundamental point of view, the downstream is gradually entering the off-season. According to SMM data, the operating rate of wire and cable enterprises in December was 84.18%, up 16.19% from the previous month. It is expected that the starting data in January will still decline. Last week, the social inventory of electrolytic copper in the mainstream areas of the country was 168400 tons, down 10400 tons from last Friday, verifying that the short-term supply and demand is still tight. With the follow-up off-season, copper prices are expected to maintain a volatile pattern.

2. For electrolytic aluminum, domestically, under the background of current environmental protection and production restrictions, the start-up of electrolytic aluminum and downstream processing enterprises have both dropped. Last week, the inventory of aluminum ingots in Badi totaled 613000 tons, down 15000 tons from the previous week, verifying that the relationship between supply and demand has improved and aluminum prices have rebounded. Looking forward to the future, as the follow-up market gradually enters the off-season, the downstream processing enterprises will have a seasonal demand decline, superposing the impact of environmental protection production restrictions, the local conversion rate of molten aluminum will fall, and the shipment of aluminum ingots is expected to increase. Social inventory of aluminum ingots is expected to continue to accumulate, forming a certain pressure on aluminum prices.

3. For zinc ingots, from a fundamental point of view, the tight supply situation at the mine end remains unchanged. Last week, processing fees in Sichuan were adjusted downwards by 50 yuan per metal ton, while processing fees in some areas have fallen below 4000 yuan per metal ton. The total inventory of zinc ingots in last week was 154000 tons, down 4800 tons from last Friday, reflecting that the relationship between supply and demand is still resilient. With the maintenance of refineries at low processing fees, the output of zinc ingots may be limited in the future, and domestic zinc ingot stocks may continue to decline. As the market gradually enters the off-season, the pressure on the demand side will also be slowly highlighted, forming a certain pressure on zinc prices.

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

1. The upstream raw materials of new energy, such as lithium, cobalt, rare earth, copper foil, aluminum foil, etc., the demand side is gradually recovering, and the supply side continues to shrink. "the bottom of price history, the bottom of enterprise profits, and the bottom of industrial policy" just provide the layout window, and the general direction of the medium-and long-term three-year upstream cycle remains the same.

2. Base metal prices will remain high and volatile, but the short-term off-season pressure and liquidity changes will gradually show. The important driving force of this round of basic metal price rebound comes from the active replenishment of industrial products under the expectation of overseas demand recovery + low inventory of industrial products + vaccines. With reference to the historical replenishment cycle, we believe that the current replenishment state is still sustainable.

3, precious metals, loose, superimposed with subsequent fiscal policy and rising inflation expectations, precious metals still have support; in addition, more importantly, energy transformation has become a consensus, photovoltaic cheap access to the Internet to drive the industrial chain to continue to rise, and silver as an irreplaceable raw material for photovoltaic, silver demand will usher in high growth, supply and demand structure will be further tightened, silver industrial attributes are worth looking forward to.

Core target:

1) New energy vehicles and 5G industry chain: Ganfeng Lithium Industry, Tianqi Lithium Industry, Huayou Cobalt Industry, Hanrui Cobalt Industry, Luoyang Molybdenum Industry, Shengtun Mining Industry, Yahua Group, Northern rare Earth, Shenghe Resources, Zhenghai Magnetic Materials, etc.

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

3) basic metals: Zijin Mining, Yunnan Aluminum Co., Ltd., Shenhuo Co., Ltd., Suotong Development, etc.