Market Overview&Investment Suggestions
This week (5.20-5.24), A-shares fell, the CSI 300 Index fell 2.08%, and non-ferrous metals underperformed the market, closing down 3.70%. At the individual stock level, the growth of electric alloy, Wanshun New Material and Youyan Powder Material led the way; Shengtun Mining, Fenghua Shares and Pengxin Resources were among the top decliners.
Industrial metals:
Copper: LME copper price this week was - 3.56% to US $10334/ton, and Shanghai copper price was - 0.24% to 84100 yuan/ton. The global copper stock accumulated 21700 tons to 644700 tons, of which LME stock accumulated 9000 tons to 112700 tons, domestic social stock accumulated 4700 tons to 415100 tons, COMEX stock accumulated 11000 tons to 17100 tons, and bonded area stock accumulated 9100 tons to 99800 tons. Macroscopically, copper prices rose sharply earlier this week due to the impact of domestic real estate support policies.
With the release of the minutes of the FOMC meeting in May by the Federal Reserve, the minutes showed that the officials of the Federal Reserve believed that it would take more time to have confidence in reducing interest rates, and the "hawkish" minutes implied that copper prices would rise and fall. In terms of supply, the zero order TC of copper concentrate slightly rebounded to -0.65 US dollars/ton this week, but it is still at a historical low. Copper concentrate is still in short supply under the disturbance of copper supply. 1Q2024 Due to the improvement of ore grade, mineral processing and recovery rate, the output of Southern Copper in Peru increased by 19%, and the output of Mexican mines increased by 0.5%. Southern Copper raised its 24 year copper output forecast of 948800 tons, an increase of 4.1% over 23 years. On the demand side, according to the latest three white electricity production scheduling reports released by Industry Online, in June 2024, the total production of air conditioners, refrigerators and washing machines will be 35.57 million, an increase of 13.2% over the same period last year, including 20.53 million air conditioners, an increase of 16.8% over the same period last year, 8.3 million refrigerators, an increase of 9% over the same period last year, and 6.74 million washing machines, an increase of 8.1% over the same period last year. Against the background of tight mining end, continuous reduction of hidden inventory of recycled copper and soft landing of the U.S. economy, domestic real estate policies are expected to maintain the upward resonance between the U.S. and China's economies, and the long-term hub of copper prices is expected to move upward. In terms of rhythm, the demand factor plays a small role in pricing during the peak consumption season in the second quarter. With the arrival of the slack consumption season in the third quarter of China, the proportion of demand pricing will rise. The smooth removal of the domestic social pool needs to consider the downstream acceptance of prices. A small adjustment of prices may be more conducive to the gradual removal of the domestic social pool. Thereafter, prices are expected to usher in a new round of increase. It is suggested to pay attention to Zijin Mining and other targets with the continuous growth of copper production.
Aluminum: LME aluminum price this week+1.41% to 2658.00 dollars/ton, Shanghai aluminum price - 0.67% to 20900 yuan/ton. The global aluminum stock accumulated 29000 tons to 2331800 tons, including 31400 tons to 1124700 tons for LME, 20000 tons to 767000 tons for domestic aluminum society, and 22400 tons to 4401000 tons for aluminum rod stock. Affected by the shortage of power and natural gas supply, the aluminum oxide shipments of Rio Tinto's Yarwun Smelter in Australia and Queensland Aluminum Oxide Co., Ltd. are in a state of force majeure, which affects the sales of aluminum oxide to third parties. The risk of shortage of overseas aluminum oxide supply gives rise to concerns about electrolytic aluminum production and promotes the rise of aluminum prices. In terms of supply, electrolytic aluminum production in Yunnan has continued to resume. As of May 23, Yunnan Shenhuo has recovered to the operating capacity before production reduction, and there is still 360000 tons of electrolytic aluminum capacity in Yunnan to be resumed. The equity market's drag on the consumption of electrolytic aluminum in the real estate is the current core expectation. The real estate support policy is expected to gradually dispel the market's pessimistic expectation on the consumption of electrolytic aluminum in the real estate, and the valuation of related companies is expected to be repaired. Against the background of domestic production red line, domestic electrolytic aluminum is expected to reach its peak output in 25 years, with a significant decline in output growth. The demand side growth is driven by new energy vehicles, ultra-high voltage, photovoltaic and other industries, and is expected to maintain steady growth. The supply gap of electrolytic aluminum will gradually expand in 25 years. After the domestic electrolytic aluminum industry is included in the carbon emission trading market, The gap between supply and demand and the rising cost side are expected to jointly push the aluminum price into a trend rise. In the context of the shortage of domestic bauxite resources and the high price of alumina, it is suggested to pay attention to the targets such as Chinalco, China Hongqiao and Tianshan Aluminium, which are rich in upstream bauxite resources.
Precious metals: COMEX gold price this week was - 3.50% to 2335.20 dollars/ounce, and 10-year TIPS of US bonds rose 4BP to 2.14%. COMEX gold inventory accumulated 0.1 million troy ounces to 17.56 million troy ounces. The Federal Reserve released the minutes of the FOMC meeting in May. After the inflation data in the first quarter of 2024 increased more than expected, the officials of the Federal Reserve were worried about the insufficient progress of inflation reduction, suggesting that the wait-and-see state of keeping high interest rates should be longer. Many officials believed that interest rates should be further raised once the inflation risk resumed. The release of the "hawkish" meeting minutes hit the market's expectation for the Federal Reserve to cut interest rates, and gold prices fell sharply. The time of the first interest rate cut by the Federal Reserve in the current market pricing is November. The Fed Watch tool shows that the probability of interest rate cut in November is 46.2%, and the time of interest rate cut is somewhat later than before. We expect Q2 to see a major rise in gold stocks under the influence of factors such as the adjustment of the balance sheet structure of the Federal Reserve and the realization of the performance of gold stocks. It is suggested to pay attention to Shandong gold and other targets with low market value per ton of resources.
Risk warning
The project construction progress is not as expected; Demand is less than expected; Metal prices fluctuate.
