China has placed deep emphasis on steady growth, and the Fed has tightened faster than expected. In early January, Chinese executives further emphasized the policy of stabilizing growth, while emphasizing the security of energy supply. The policy orientation of steady growth will hopefully promote the easing and elimination of metal supply-side constraints, and it will also promote the recovery of downstream manufacturing demand, and the logic of metal prices will accelerate the transition from the supply side to the demand side. Since the rapid landing of the active real estate policy since December 2021, and the expansion of infrastructure investment has become the main focus for steady growth, metal varieties with a high proportion of demand in the construction industry are expected to continue to maintain a strong trend. Overseas, the minutes of the FOMC meeting released on January 6 showed that the Fed's tightening speed may be faster than expected, and the detailed contraction plan will be implemented soon, which was only implemented by the Fed in 2017 after World War II; the bond market expects the Fed to raise interest rates to three times for the whole of 2022, resulting in a certain suppression on precious metals. CPI in the euro zone rose to 5% in December, with rising energy prices becoming the main factor. There is still great uncertainty about the supply of natural gas in Europe, which could further push up inflation in the euro zone and disrupt the supply of energy-intensive metal products.
The energy crisis in Europe continues to ferment, with Lun Aluminum driving up aluminum prices; macro expectations support copper prices. SHFE aluminum prices rose 3 per cent to 20995 yuan per tonne. On January 10th, SMM counted 752000 tons of electrolytic aluminum in China, down 24000 tons from last Thursday. Aluminum prices are still supported this week by the continued ferment of the European energy crisis and low domestic inventories. The energy crisis in Europe continues to ferment. According to SMM, Europe's current production capacity affected by the energy crisis is about 800,000 tons per year, accounting for 1% of the total global electrolytic aluminum production capacity. Russia said that in order to ensure its own heating, it would actively reserve natural gas, which led to the outage of the "Yamal-Europe" natural gas pipeline, but the market speculated that the outage may be caused by the suspension of the "Nord Stream 2" project. It is expected that the energy crisis in Europe will lead to a further tightening of overseas electrolytic aluminum supply. The inventory of domestic aluminum ingots is still low and has been removed. At the same time, the State Council issued a notice on the "overall pilot plan for comprehensive reform of market-oriented allocation of factors", pointing out that carbon emission rights will be further improved in 2021 and 2025. It is expected that electrolytic aluminum enterprises with clean energy will continue to benefit. SHFE copper fell 0.86 per cent to 69520 yuan per ton this week, with the Fed tightening faster than expected as a major factor in copper prices. Demand after New Year's Day in China is still relatively weak, coupled with the expansion of the scope of the epidemic and limited transportation, we expect that it may be difficult to have a bright spot on the demand side before the Lunar New year. Manufacturers mainly pay for stocks on bargain prices, and the market turns to demand expectations for the peak season after the year. Overseas demand is relatively strong. After the lower-than-expected primary copper production in 2021, the certainty of copper supply increased in 2022, and the new and expanded capacity in South America, Africa and Southeast Asia entered the period of climbing and reaching production. Considering the extremely low global inventories in the short term, the off-season at the beginning of the year in China, and the supply-side release still need a certain cycle, copper prices are difficult to break the volatility pattern, focusing on tracking the transition of the off-peak season after the Lunar New year.
The price of electric carbon exceeded 300,000 yuan / ton. This week, the price of lithium carbonate without tin plate rose 5.71% to 388500 yuan / ton, lithium hydroxide rose 6.3% to 2444 million yuan / ton, spodumene price rose 2.8% to $2575 / ton, and the spot price of lithium carbonate exceeded 300,000 yuan / ton. At the end of the year, some manufacturers entered the stage of shutdown and overhaul, and the output continued to decrease and the release of lithium concentrate minerals was limited, resulting in the production capacity of lithium salt could not be completely released. This week, the operating rates of lithium carbonate and lithium hydroxide fell 4.3%, 6.9% to 40.1% and 53.71%, respectively, and production decreased by 4.3%, 6.9% to 3633 and 3731 tons, respectively. The shortage of supply in the market intensified, there was no large shipment, and inventory consumption was obvious. The inventory of lithium carbonate and lithium hydroxide decreased by 6%, 1.51% to 5200 and 391 tons, respectively. On the demand side, various car companies announced car production and delivery volume in 2021. Tesla still produced 930000 vehicles in 2021 and delivered 936000 vehicles in the face of lack of core and epidemic situation, an increase of 87.4 percent over the same period last year. Xiaopeng, Weilai and the ideal annual delivery volume are 9.82,9.14 and 90500 respectively, an increase of 260%, 109% and 177% over the same period last year. The high prosperity of the industry has accelerated the expansion of mid-stream links such as lithium salt plants, cathode material factories and battery factories, while the mismatch between supply and demand of lithium resources can not be effectively alleviated in the next few years due to the difference between lithium resources and the construction cycle of lithium salt plants, and lithium resources enterprises will face a revaluation of their value. It is suggested to focus on undervalued enterprises or enterprises with marginal growth of lithium resources that are rich in lithium reserves and benefit from rising lithium prices.
Rare earths and magnetic materials rose sharply. This week, neodymium oxide and metal neodymium rose 85000 / ton to 1.015 million / ton and 1.24 million / ton respectively, while NdFeB blank rose 12000 / ton. The shortage of rare earth oxides intensified at the end of the year, and the price of rare earths was pushed up by locking up after magnetic manufacturers took orders. According to the 30% praseodymium and neodymium content in high-end NdFeB, the cost of magnetic materials has increased by 25500 / ton, while the price of magnetic materials has increased by only 12000 / ton, further testing the technical level of magnetic manufacturers and the cost transmission capacity of high-end products. Northern rare earths and Baotou Steel signed a 2022 rare earth ore supply agreement, which agreed to raise the price of rare earth ores by 51% to 26887 yuan per ton, with a total supply of no more than 230000 tons. At present, the market price of 50% mixed carbonate ore is 64000 / ton with tax, which is more than 100% higher than the above agreement price. There is no sign of improvement in the upstream mine end in the short term. Before the issuance of the first batch of rare earth mining quotas in 2022, we expect rare earth prices to remain strong, and the ability of high-end magnetic manufacturers to transmit costs downstream is also expected to increase.
Interest rate hikes are expected to be advanced, and precious metals are under pressure. SHFE gold prices fell 1.4 per cent to 369.6 yuan / kg, SHFE silver fell 4.6 per cent to 4657 yuan / the real yield on kg, 10-year Treasury bonds rose 0.32 per cent to-0.72 per cent SPDR gold positions in 977.08 tons, up 1.42tons from the beginning of the week, while SLV silver positions were basically the same as last week. The minutes of this week's FOMC December meeting said that the pace of interest rate hikes would exceed market expectations, while Brad said that interest rates could be raised as early as March, precious metals fluctuated downwards during the week, and the Fed minutes may deepen market expectations of multiple interest rate hikes by the Fed in 2022. Precious metals are still affected by interest rate hikes in the short term, and suggest that we should continue to pay attention to the policies of various countries to raise interest rates.
Investment suggestion: in the context of the "double carbon" goal, pay attention to the historic investment opportunities of new energy and new materials, focus on new energy metals (lithium, cobalt, nickel, rare earth) with strong demand and weak supply pattern, and new metal materials that benefit from industrial upgrading and domestic substitution. Lithium suggests paying attention to Tianqi Lithium Industry, Ganfeng Lithium Industry, Yongxing material, Shengxin Lithium Energy, etc.; New Materials suggest paying attention to Homei New Materials, Power Diamond, Hesheng shares, Quartz shares, Bowei Alloy, Chujiang New Materials, etc. Titanium suggests paying attention to Bao Ti shares, Anning shares, etc.; Precious Metals suggest paying attention to Chifeng Gold, Yintai Gold, Precious Research Platinum Industry, etc. Industrial metals suggest to pay attention to cloud aluminum shares, Shenhuo shares, Western Mining, Zijin Mining, Lizhong Group, Suotong development and so on.
Risk factors: lower-than-expected decline in downstream demand, a shift in supply-side constraint policies, less-than-expected domestic liquidity easing, higher-than-expected liquidity tightening in the United States, a sharp fall in metal prices, and so on.
