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Non-ferrous metals trend in the second half of the year or only phase rebound
2023/6/8
In the first half of 2023, global commodities experienced a generalized sharp decline, with non-ferrous metals leading the decline. The general decline in commodities is closely related to the economic slowdown in developed economies such as Europe and the United States, global monetary tightening, the dissipation of supply disruptions brought about by epidemics and geopolitical crises, and other factors. Looking ahead, we believe that after the domestic non-ferrous metals market has experienced a period of active destocking, the inventory pressure in the aftermath is weakening, and there will even be replenishment activities, while the slowdown of the Fed's interest rate hike overseas means that the suppression of the financial attributes of commodities is weakening, and there is the possibility of a phase rebound in non-ferrous metals. However, the poor economic growth prospects in Europe and the United States, especially the banking crisis to the European and American economies in the fourth quarter brought the risk of recession, non-ferrous metals in the second half of the year or only a phase rebound, rather than has bottomed out.
Supply is relatively stable
In terms of the domestic economy, from January to April, industrial value added growth rebounded in stages, including a rebound to 5.6% in April, mainly due to the recovery of manufacturing output, but the lack of demand. By industry, the upstream mining industry slowed industrial value added growth due to lack of demand, and even saw negative year-on-year growth in April. While the midstream processing manufacturing industry, such as non-ferrous metal smelting and rolling processing industry added value growth rate rose steadily to 7.4% in April, higher than the 1.4% growth rate in the same period last year.
From the official manufacturing PMI sub-indicators, the production index fell slower than the new orders index, the manufacturing production index fell back to 49.6% in May, but the new orders index fell back to 48.3%, which also indicates that the manufacturing output growth rate is still higher than the demand growth rate, which brings the manufacturing industry is forced to take the initiative to inventory. By May, it fell back to 5.9%, returning to a relatively reasonable level.
Non-ferrous metal output was relatively stable, with only electrolytic aluminum and electrolytic nickel output showing a phased decline, but cumulative output from January to April was still up year-on-year. Data released by the National Bureau of Statistics show that from January to April, the cumulative output of refined copper, electrolytic aluminum, refined lead and refined zinc increased by 12.9%, 3.9%, 9.7% and 8.2% year-on-year, respectively. Institutional research data shows that from January to April, domestic electrolytic nickel production increased by 36.4% year-on-year. To further verify the growth of domestic refined copper production, the agency researched 22 mainstream copper smelters in China and found that the refined copper production of these 22 copper smelters increased by 18.5% year-on-year in April.
For electrolytic aluminum, due to the implementation of the "double carbon" policy, as well as the 45 million tons of capacity ceiling restrictions, the expansion of domestic electrolytic aluminum production capacity in the past five years slowed down. In addition, electrolytic aluminum production capacity to hydropower and other clean energy areas, hydropower and other clean energy instability led to fluctuations in electrolytic aluminum production. February, Yunnan due to continued drought again 20% reduction in production. However, due to the domestic electrolytic aluminum production capacity as a whole in the state of surplus, so the unstable hydropower brought about by the reduction of production on aluminum supply impact is relatively limited.
From the perspective of overseas markets, although due to the continued sharp decline in European natural gas prices, European non-residential electricity prices have fallen sharply, 2023 European electrolytic aluminum and refined zinc industry will see a resumption of production, which means that similar to 2022 due to the energy crisis led to overseas non-ferrous metals production cuts will not be reproduced. In copper, the International Copper Study Group released data showing that in the first quarter, global refined copper production increased by 7.5% year-on-year to 6.69 million tons. In terms of aluminum, data released by the International Aluminium Association showed that in April, global primary aluminum production was 5.628 million tons, up from 5.609 million tons a year earlier.
Demand continues to weaken
From the perspective of economic growth, the economy of overseas economies are decelerating in the first quarter, which means that overseas demand for non-ferrous metals is weakening. According to data released by the OECD, the GDP growth rate of the G7 fell back to 1.2% year-on-year in the first quarter, compared with a high of 4% in the same period last year.
By country, the U.S. GDP real year-on-year growth rate fell back to 1.6% in the first quarter, and the chain discount annual rate fell back to 1.3%, compared with 2.6% in the fourth quarter of last year. U.S. copper consumption is mainly distributed in construction, durable goods and home appliances, while January-April U.S. real estate continues to weaken in the face of rising mortgage rates, including a 22.3% year-over-year decline in new housing starts in April. The International Copper Study Group research found that in the first quarter, the global refined copper market was oversupplied by 332,000 tons, compared with a surplus of 0.8 million tons in the same period last year. U.S. aluminum consumption is mainly distributed in transportation, construction and packaging, the three sectors of consumption accounted for 39%, 25% and 16% of its total aluminum consumption. Reflecting the U.S. transportation boom, core capital orders in April rose only 2.6% year-on-year, 5.8% in the same period last year.
From the domestic market, the main consumption areas of non-ferrous metals in electricity, construction, home appliances and transportation, etc. From January to April, home appliances and automobiles benefited from exports, production and sales did not decline significantly; social retail sales of household appliances and audio equipment sales fell 0.3% year-on-year; domestic automobile production rose 8.6% year-on-year, mainly driven by the growth of new energy production, traditional The output of traditional fuel vehicles only increased by 5.6%.
For copper, copper for construction accounts for about 8% of domestic copper consumption, which is about 64,000 tons per month. January-April real estate investment fell by 6.2% year-on-year, and the cumulative area of completed housing increased by 18.8% year-on-year. Materials fell 4.5% year-on-year, which means that the completion of housing renovation of copper consumption pull is still weak. And power investment year-on-year growth rate rebounded, January-April, power investment and power grid investment cumulative year-on-year growth of 53.6% and 10.3%, mainly benefited from the installed capacity of photovoltaic and wind power climb, but after April photovoltaic and wind power installed capacity growth rate began to fall, showing that power investment growth rebounded on the non-ferrous metal consumption pull lack of sustainability.
Adjustment height is limited
From the current domestic industrial enterprises above the scale of finished goods inventory, the growth rate fell back to 5.9% in April, showing that industrial enterprises to take the initiative to go to the end of the inventory. Considering the "golden nine silver ten" season is gradually approaching, the midstream processing manufacturing industry and downstream terminal enterprises may have a phase of replenishment, driving the non-ferrous metals rebound phase.
However, the height of the rebound of non-ferrous metals is limited. On the one hand, from the perspective of overseas markets, Europe and the United States banking crisis brought about by the credit crunch, continued high interest rates on the inhibition of residential consumption and corporate sector debt service pressure poses a challenge, which means that the fourth quarter in Europe and the United States economic recession is likely to occur. In the U.S., for example, from the industrial manufacturing sector, commercial and industrial credit continued to weaken due to the banking crisis, while a strong job market continued to provide U.S. residents with the funds to keep spending. personal consumption expenditure rose 0.8% in April from a year earlier, compared to 0. However, from the consumer confidence index, it is likely that U.S. residents' personal consumption expenditure will be downward again in May. From our economic forecast model, we deduce that U.S. consumer spending may enter negative growth in the fourth quarter, thus making the economy recessionary.
On the other hand, it is difficult for the overseas Fed to cut interest rates during the year, while domestic monetary policy is estimated to be difficult to relax, mainly through reform to release dividends and industrial policy to provide economic growth momentum. From the central bank's first quarter monetary executive report, it can be seen that "prudent monetary policy should be precise and strong, the total amount is moderate, and the rhythm is smooth" means that the total monetary easing is unlikely, in addition to mentioning "improve cross-cycle adjustment, maintain a reasonable abundance of liquidity, maintain the money supply and social This means that the central bank's monetary policy should take into account cross-cyclical factors, unlike the previous counter-cyclical operations.
Supply is relatively stable
In terms of the domestic economy, from January to April, industrial value added growth rebounded in stages, including a rebound to 5.6% in April, mainly due to the recovery of manufacturing output, but the lack of demand. By industry, the upstream mining industry slowed industrial value added growth due to lack of demand, and even saw negative year-on-year growth in April. While the midstream processing manufacturing industry, such as non-ferrous metal smelting and rolling processing industry added value growth rate rose steadily to 7.4% in April, higher than the 1.4% growth rate in the same period last year.
From the official manufacturing PMI sub-indicators, the production index fell slower than the new orders index, the manufacturing production index fell back to 49.6% in May, but the new orders index fell back to 48.3%, which also indicates that the manufacturing output growth rate is still higher than the demand growth rate, which brings the manufacturing industry is forced to take the initiative to inventory. By May, it fell back to 5.9%, returning to a relatively reasonable level.
Non-ferrous metal output was relatively stable, with only electrolytic aluminum and electrolytic nickel output showing a phased decline, but cumulative output from January to April was still up year-on-year. Data released by the National Bureau of Statistics show that from January to April, the cumulative output of refined copper, electrolytic aluminum, refined lead and refined zinc increased by 12.9%, 3.9%, 9.7% and 8.2% year-on-year, respectively. Institutional research data shows that from January to April, domestic electrolytic nickel production increased by 36.4% year-on-year. To further verify the growth of domestic refined copper production, the agency researched 22 mainstream copper smelters in China and found that the refined copper production of these 22 copper smelters increased by 18.5% year-on-year in April.
For electrolytic aluminum, due to the implementation of the "double carbon" policy, as well as the 45 million tons of capacity ceiling restrictions, the expansion of domestic electrolytic aluminum production capacity in the past five years slowed down. In addition, electrolytic aluminum production capacity to hydropower and other clean energy areas, hydropower and other clean energy instability led to fluctuations in electrolytic aluminum production. February, Yunnan due to continued drought again 20% reduction in production. However, due to the domestic electrolytic aluminum production capacity as a whole in the state of surplus, so the unstable hydropower brought about by the reduction of production on aluminum supply impact is relatively limited.
From the perspective of overseas markets, although due to the continued sharp decline in European natural gas prices, European non-residential electricity prices have fallen sharply, 2023 European electrolytic aluminum and refined zinc industry will see a resumption of production, which means that similar to 2022 due to the energy crisis led to overseas non-ferrous metals production cuts will not be reproduced. In copper, the International Copper Study Group released data showing that in the first quarter, global refined copper production increased by 7.5% year-on-year to 6.69 million tons. In terms of aluminum, data released by the International Aluminium Association showed that in April, global primary aluminum production was 5.628 million tons, up from 5.609 million tons a year earlier.
Demand continues to weaken
From the perspective of economic growth, the economy of overseas economies are decelerating in the first quarter, which means that overseas demand for non-ferrous metals is weakening. According to data released by the OECD, the GDP growth rate of the G7 fell back to 1.2% year-on-year in the first quarter, compared with a high of 4% in the same period last year.
By country, the U.S. GDP real year-on-year growth rate fell back to 1.6% in the first quarter, and the chain discount annual rate fell back to 1.3%, compared with 2.6% in the fourth quarter of last year. U.S. copper consumption is mainly distributed in construction, durable goods and home appliances, while January-April U.S. real estate continues to weaken in the face of rising mortgage rates, including a 22.3% year-over-year decline in new housing starts in April. The International Copper Study Group research found that in the first quarter, the global refined copper market was oversupplied by 332,000 tons, compared with a surplus of 0.8 million tons in the same period last year. U.S. aluminum consumption is mainly distributed in transportation, construction and packaging, the three sectors of consumption accounted for 39%, 25% and 16% of its total aluminum consumption. Reflecting the U.S. transportation boom, core capital orders in April rose only 2.6% year-on-year, 5.8% in the same period last year.
From the domestic market, the main consumption areas of non-ferrous metals in electricity, construction, home appliances and transportation, etc. From January to April, home appliances and automobiles benefited from exports, production and sales did not decline significantly; social retail sales of household appliances and audio equipment sales fell 0.3% year-on-year; domestic automobile production rose 8.6% year-on-year, mainly driven by the growth of new energy production, traditional The output of traditional fuel vehicles only increased by 5.6%.
For copper, copper for construction accounts for about 8% of domestic copper consumption, which is about 64,000 tons per month. January-April real estate investment fell by 6.2% year-on-year, and the cumulative area of completed housing increased by 18.8% year-on-year. Materials fell 4.5% year-on-year, which means that the completion of housing renovation of copper consumption pull is still weak. And power investment year-on-year growth rate rebounded, January-April, power investment and power grid investment cumulative year-on-year growth of 53.6% and 10.3%, mainly benefited from the installed capacity of photovoltaic and wind power climb, but after April photovoltaic and wind power installed capacity growth rate began to fall, showing that power investment growth rebounded on the non-ferrous metal consumption pull lack of sustainability.
Adjustment height is limited
From the current domestic industrial enterprises above the scale of finished goods inventory, the growth rate fell back to 5.9% in April, showing that industrial enterprises to take the initiative to go to the end of the inventory. Considering the "golden nine silver ten" season is gradually approaching, the midstream processing manufacturing industry and downstream terminal enterprises may have a phase of replenishment, driving the non-ferrous metals rebound phase.
However, the height of the rebound of non-ferrous metals is limited. On the one hand, from the perspective of overseas markets, Europe and the United States banking crisis brought about by the credit crunch, continued high interest rates on the inhibition of residential consumption and corporate sector debt service pressure poses a challenge, which means that the fourth quarter in Europe and the United States economic recession is likely to occur. In the U.S., for example, from the industrial manufacturing sector, commercial and industrial credit continued to weaken due to the banking crisis, while a strong job market continued to provide U.S. residents with the funds to keep spending. personal consumption expenditure rose 0.8% in April from a year earlier, compared to 0. However, from the consumer confidence index, it is likely that U.S. residents' personal consumption expenditure will be downward again in May. From our economic forecast model, we deduce that U.S. consumer spending may enter negative growth in the fourth quarter, thus making the economy recessionary.
On the other hand, it is difficult for the overseas Fed to cut interest rates during the year, while domestic monetary policy is estimated to be difficult to relax, mainly through reform to release dividends and industrial policy to provide economic growth momentum. From the central bank's first quarter monetary executive report, it can be seen that "prudent monetary policy should be precise and strong, the total amount is moderate, and the rhythm is smooth" means that the total monetary easing is unlikely, in addition to mentioning "improve cross-cycle adjustment, maintain a reasonable abundance of liquidity, maintain the money supply and social This means that the central bank's monetary policy should take into account cross-cyclical factors, unlike the previous counter-cyclical operations.
In summary, there is a chance for another wave of rebound in the second half of the year for non-ferrous metals, however, the poor economic outlook in Europe and the US means that the height of the rebound for non-ferrous metals is still limited during the year. Foreign investors can use the COMEX aluminum futures (product code: ALI) of Chicagoland to capture trading opportunities, and domestic enterprises can use the non-ferrous metal futures of Shanghai Futures Exchange to hedge the potential risk of rising raw materials. In recent years, participation in Chicagoland's aluminum futures market has increased significantly, providing market participants with another viable tool to manage their aluminum price exposures.
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