Hottest 2019 metal Trend Outlook supply shocks red

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2019 metal Trend Outlook: supply shocks are expected to reduce demand fluctuations will become the core

in 2018, the price of base metals is weak, and many varieties have the largest annual decline since 2015. In 2018, the global market was volatile. Emerging markets first weakened, led by China, and then spread to developed markets. The euro zone and the United States all began to slow down in the fourth quarter. Generally speaking, the global economy is relatively synchronized. Looking forward to 2019, we still maintain a relatively pessimistic attitude. We can refer to the trend of base metal market in 2015. 2018 is a year of bull bear conversion, and 2019 may be a year of bear deflation

in the past ten years, China has occupied an absolutely dominant position in the new demand for global bulk raw materials. The economic growth of early industrialized countries is gradually decoupled from the consumption of mineral resources, and their demand shows a stable or even downward trend. However, due to their small size, emerging market economies have a small number, although their demand growth rate is fast. Therefore, about 70% to 80% of the new demand for many mineral resources in the global market is contributed by China. It can be said that China has driven the global non-ferrous metal market, and China's market changes affect the trend of the whole non-ferrous metal price. But now this pulling effect is being weakened, and the global market is seeking new consumption growth points

the Chinese market is still the core influencing factor, with the weakening economy and high debt constraining the stimulus policy. According to the latest data from the National Bureau of statistics, the total profits of Industrial Enterprises above designated size increased by 11.8% in June, with the growth rate slowing down by 1.8% compared with that in January. Among them, the total profit of the mining industry was 527.04 billion yuan, an increase of 45.1% year-on-year, and the increase rate was 2% lower than that of the month. Specifically, the non-ferrous metal mining and beneficiation industry achieved a profit of 37.63 billion yuan, an increase of 5.5% year-on-year; From the perspective of the whole industrial chain, the non-ferrous metal smelting and rolling processing industry decreased by 16.9%

it is estimated that the profit distribution of non-ferrous industry in 2019 will tilt from the upstream to the middle and downstream industries; Supply, demand, price and inventory fell across the board, making the manufacturing PMI fall to an offline and record low in December. According to the meso high-frequency data, since December, terminal demand has remained weak, industrial production has remained stable in the short term, and inventories are generally high, pointing to the continuation of active destocking. Looking forward to 2019, the weakening demand for base metals will continue to drag down production and drive prices down. The risk of deflation is heating up, and the profit distribution of the industry will also tilt from the upstream to the middle and downstream industries

king of color: copper, short positions may be stronger than bulls

copper is the king of commodities. Before judging the price, first look at the influencing factors of copper. First of all, looking at the fundamentals, prices and inventories often do not match. Comparing the changes of Shanghai copper prices and inventories, it is found that the correlation between the two is only 20%. Basically, the guidance of unilateral prices is not particularly obvious. In fact, inventories are more suitable for guiding price differences and rising discounts

next, it depends on macro factors. The downward CPI of China and the United States almost ended the last hope of copper rising. In addition, the spread of U.S. corporate bond interest rates began to expand slowly this year, and the spread of U.S. corporate interest rates was negatively correlated with copper. The price of copper was the same as that of U.S. debt 10Y. The U.S. debt began to decline after the previous peak of 3.261. 2y-10y has been upside down for nearly a month, and it is expected that copper will start a relatively large downward market in the future. Finally, there is a strong positive correlation between copper and global PMI, with a correlation of 89%

based on the judgment that the global economic growth rate will decline in 2019, we believe that it is difficult for copper prices to get out of the soaring market, and there is still room for correction. It is expected that LME Luntong will rely on the first-line operation of US $5800/ton in 2019, and domestic Shanghai copper futures will fluctuate in the range of yuan/ton. In terms of arbitrage, we can pay attention to the opportunities of positive arbitrage after the Spring Festival. On the one hand, the downstream will gradually resume work after the Spring Festival. With the arrival of the peak consumption season in March, and the maintenance of smelters will increase, the price difference will narrow. In terms of risks, attention should be paid to Sino US trade frictions; China's economic downturn exceeded expectations; Whether the power investment can exceed the expectation; The ban on the import of scrap copper exacerbated the shortage

institutional view

Everbright Futures: financial attributes have become the main factor leading the direction of copper price fluctuations, and the impact of financial attributes on copper prices in 2019 is generally short. The influence of commodity attributes on the fluctuation range and rhythm of copper price is more obvious. The global supply-demand relationship may further narrow in 2019. It is estimated that the annual supply-demand shortage is nearly 400000 tons, and the shortage range is significantly higher than that of previous years. In terms of supply, copper supply has entered a low growth cycle, and the growth rate of copper supply may decline; In terms of demand, China's macro policies and the low base of power investment in real estate in 2018 make us optimistic about the demand growth rate in 2019. Copper prices may fluctuate in a narrow range, with weak shocks. It is estimated that the main fluctuation range of copper price in 2019 is US $5400-6600, and the annual average price is US $6000

CITIC Futures: it is expected that copper prices will continue to fluctuate downward in 2019, looking for a reasonable price center. The global economy has slowed passively, and the three consecutive years of rapid economic growth since 2016 have come to an end. The adjustment of economic growth will slow down the growth of copper demand, and new industry growth points can only wait in the short and medium term (new energy vehicles, etc.); However, the interference from the supply side (including copper supply under the increase of interference rate, waste copper supply under environmental protection policies, and refined copper output under environmental protection pressure of smelters in India and Chile) determines the magnitude and pace of copper price decline. The price may rise before and fall after the year. The copper price operation range in 2019 is USD/ton and yuan/ton

Yide Futures: the current market has contained all kinds of pessimistic expectations, but at the same time, the industry is quietly pregnant with opportunities. The growth rate of copper mine output slowed down and the downstream demand shifted, but the demand performance was stable and did not stall with the economic downturn. From the perspective of the final indicator inventory of supply and demand, at present, the global dominant inventory of copper has reached a rare low for many years. At the same time, the copper spot premium is at a high level in recent years, indicating that downstream consumption is not weak. When the recovery period of domestic copper scrap has not really arrived, the policy of comprehensively banning the import of seven types of copper scrap also implies a supply crisis. We believe that the current weak copper price is due to the panic from the macro perspective, which masks some highlights in the commodity attributes of copper metal. There is a large room for improvement in the marginal supply and demand of copper itself. The extremely low inventory of copper provides a good rebound basis for copper prices. After a year of confrontation, dialogue and adjustment, China and the United States are likely to finally find a new adaptive relationship. In 2019, China US relations are likely to ease. After the external crisis is lifted, copper prices may usher in emotional repair and value reshaping. It is expected that the core fluctuation area of Lun copper next year will be the US dollar and Shanghai copper dollar

aluminum: there is a long way to go to the bottom in 2019

since 2018, the production limit in the heating season has been less than expected and the demand for the Spring Festival holiday has weakened. Aluminum prices began to fall from high levels, and Shanghai aluminum hit a low of 13690 yuan/ton on March 23. On April 6, 2018, the US sanctions against Rusal triggered concerns about global aluminum supply. Lun aluminum rose rapidly, and Lun aluminum rose to $2718/ton. Since the second quarter, domestic demand began to pick up, so Shanghai aluminum followed Lun aluminum up, and hit a year high of 15590 yuan/ton on April 19. However, the US delayed the sanctions against Rusal, and aluminum prices began to sell back at the end of June. In the third quarter, the domestic environmental protection supervision and the production suspension of hydro pushed alumina up sharply, and during this period, the "Alcoa strike" event fueled the flames, with Shanghai aluminum up to 15125 yuan/ton. However, since September, aluminum prices have returned to the downward channel due to the lower than expected production limit in the heating season and the sluggish peak season of "golden nine and silver ten"

looking forward to 2019, on the supply side, since the supply side reform in 2017, China's electrolytic aluminum production capacity and output have been effectively controlled by the environmental pollution caused by plastic granulators. Under the current policy environment, disorderly capacity expansion has been strictly prohibited, and the increase of industry capacity is only capacity replacement and compliance capacity indicators. In the future, the capacity ceiling of electrolytic aluminum industry has appeared. Although there is still room for production capacity to rise, due to the downturn in aluminum price, the profit of electrolytic aluminum has fallen sharply, and the industry area is at a loss, there are many phenomena of delayed production and forced production reduction, and the overall supply side will be weak next year

in terms of demand, there has been a deviation in the data of new construction, construction and completion of commercial housing this year, but at present, the capital of real estate has slightly improved, which may indicate that the construction and completion of houses under construction will gradually warm up and improve the consumption of building profiles. However, the real estate industry is still under strict control, so it is difficult to significantly relax the policy in the short term. The period of rapid growth in China's automobile production and sales may have passed, but the explosive growth of new energy vehicles will drive the demand for battery foil and the development of "lightweight" technology. In the context of national infrastructure development, the state has increased power investment and concentrated on the UHV construction sector at the demand end of aluminum cables, which may provide a large increase in aluminum consumption in 2019. With the trend of Sino US trade negotiations improving, we believe there is still a certain room for growth in aluminum exports next year. In addition, there is still a certain gap between China and developed countries in the proportion of aluminum used for aluminum foil in the packaging field, including aluminum foil. In the long run, there is a lot of room for growth

on the whole, the demand side of aluminum in 2019 is weak, and the consumption growth rate is expected to maintain 4.5%. In terms of cost, although the downward trend of alumina price in 2019 is relatively certain, we still have expectations for the self provided power plan, and the cost increase caused by its implementation may be higher. On the whole, we do not expect the overall cost center of electrolytic aluminum to move down significantly. To sum up, in the case of weak supply and demand, the aluminum price in 2019 will need to go through a long-term bottom trend, and may rebound after the Spring Festival next year, but then it will slowly explore the bottom with a high probability. It is expected that the operating range of Lun aluminum is USD/ton, and the operating range of Shanghai aluminum is yuan/ton

institutional view

Yide Futures: consumption has entered the traditional off-season of the Spring Festival, it is inevitable that aluminum ingot inventory will accumulate, and the aluminum price will fall below the cost support and enter the bottom stage. The production limit in the heating season was less than expected. Under the pressure of the economic downturn, the implementation of the policy was loosened. Although some electrolytic aluminum enterprises were forced to reduce production due to losses, the scale of the reduction was limited, and the overall supply-demand balance had not fluctuated significantly, which was not enough to reverse the aluminum market price. The profits of the industry are uneven, and the electrolytic aluminum industry is generally facing losses or even cash flow losses. The alumina industry maintains good profits due to the opening of the export market. However, under the downward pressure of the overall industry, there is still room for alumina prices to decline, the cost line of electrolytic aluminum has a further downward trend, and the bottoming process of aluminum prices may not be over

the actual consumption growth rate of the aluminum market in 2018 is far lower than expected. When there is no sign of improvement at the macro level, the prediction of the consumption growth rate in 2019 is generally pessimistic. However, the aluminum price is depressed, and the profit compression will also inhibit the production speed of new capacity. In 2019, the supply of the aluminum market is still in a tight balance, the high inventory continues to normalize, and the process of destocking is slow. The improvement of consumption growth may only wait for the support of national policies, the decline of value-added tax, the pull of infrastructure, the policy stimulus of real estate and other related industries, and the progress of Sino US trade will become the main factors affecting aluminum demand

Galaxy Futures: it is expected that in the first quarter of 2019, due to the seasonal factors of the Spring Festival, the inventory will enter the accumulation stage again, and the aluminum price will fall under pressure. As the overall cost of raw materials is still in the rising stage, the price of raw materials will stop falling and stabilize, which will make electrolytic aluminum

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