The situation in Russia and Ukraine has changed in favor of nickel, aluminum, palladium, platinum, etc. [institutional review]

What happened: according to news, on the evening of February 21, local time, Putin signed a presidential decree recognizing the "Donetsk people's Republic" and the "Luhansk people's Republic" in eastern Ukraine, and signed a treaty of friendship and mutual assistance with regional leaders to send peacekeeping troops. It is reported that on February 22, local time, the President of the United States announced sanctions against Russia's two major financial institutions.

The change in Russia and Ukraine leads to the supply risk of non-ferrous commodities, which is good for nickel, aluminum, palladium, platinum, magnesium and so on. Russia is the world's leading exporter of aluminum, nickel, palladium and platinum. Russia's exports of aluminum, nickel, palladium and platinum account for 12 per cent, 7 per cent, 26 per cent and 4 per cent of global export trade respectively. European exports of aluminum, nickel, palladium and platinum account for 16 per cent, 42 per cent, 45 per cent and 36 per cent of global exports to Europe, respectively, and magnesium ingots account for about 8 per cent of global output. The change in the situation in Russia and Ukraine may have a certain impact on the global supply of aluminum, nickel, palladium, platinum and other non-ferrous metals, and is expected to push up the prices of related products.

The change in Russia and Ukraine has caused concerns about energy supply, and the prices of high energy-consuming products are supported, which is good for aluminum, zinc, industrial silicon and so on. 1) Russia is an important energy exporter, the European Union is Russia's main natural gas exporter, and the EU imports more than 40% of its natural gas from Russia. 2) since the beginning of winter in 2021, due to the shortage of natural gas supply, the price of natural gas futures in December has exceeded US $2000 per thousand cubic meters, an increase of more than 700% over the beginning of the year. When the average price of electricity in most European countries exceeds 300 euros per megawatt, it has increased by more than 500% since the beginning of the year. 3) the energy crisis in Europe has led to a sharp rise in the cost of aluminum and zinc in Europe, affecting the supply of aluminum and zinc in Europe. At the end of 2021, the prices of aluminum and zinc in the three months of LME were $2805 and $3538 / ton, respectively, up 40% and 27% from the beginning of the year. 4) although the current European heating season is coming to an end, and natural gas and electricity prices are expected to fall, the situation in Russia and Ukraine has changed, and Germany has suspended the certification of the "Beixi No. 2" pipeline, which is expected to cause market concerns about the supply of natural gas in Europe. Natural gas and electricity prices are expected to rise. 5) Europe is a major producer of high energy-consuming metals, such as electrolytic aluminum, zinc and industrial silicon. The production capacity of aluminum, zinc and industrial silicon in Europe accounts for about 11%, 15% and 6% of the world's total production capacity. If the energy problem in Europe continues, the electricity cost of the relevant smelting enterprises is high, which is expected to affect the supply of related products and cause prices to rise.

Investment analysis opinion: the change in Russia and Ukraine may cause concerns about commodities and energy supply, benefit nickel, aluminum, platinum, palladium and other metals, prefer nickel with strong demand support, and attach importance to Huayou Cobalt (nickel resource leader, positive material integration leader). It is recommended to pay attention to Yunshan Aluminum shares, Chinalco, Shenhuo shares, Yunhai Metal, Hesheng Silicon Industry, Precious Research Platinum Industry (palladium, platinum plate scarce target).

Risk hints: international geopolitical changes, macroeconomic changes, commodity price changes