SHMET Interview with Minmetals Jingyi Futures: Interpretation of Nonferrous Metal Market in the Second Half of the Year

Record of this interview:

The Minmetals Economics and Futures Nonferrous Research Team's interpretation of the nonferrous metals market in the second half of this year is as follows:

Copper: The epidemic has caused a global shortage of copper concentrate to expand to about 600,000 tons, a surplus of refined copper of about 160,000 tons, and a surplus of refined copper expanded to 400,000 tons in 2021. Throughout the year, China's refined copper is expected to be slightly over 30,000 tons. In the third quarter, domestic and China's bonded area stocks are expected to continue to degenerate and re-accumulate in the fourth quarter.

On the price level, the time when China, the United States and Europe are contracting fastest and the epidemic is worst has passed. Copper prices are in the stage of price repair after the epidemic. Against the background of low inventories and looser global liquidity, copper's configuration value has increased, and the price center of gravity is expected to move further upwards in the second half of the year. Under the judgment of continuing to destock in the third quarter and accumulate in the fourth quarter, the copper price may rise first and then restrain the trend. The reference for the main operating range of Shanghai Copper: 42000-51000 yuan/ton, corresponding to the copper price of 5000-6700 US dollars/ton. In the intertemporal period, under low inventory conditions, attention can be paid to domestic buying and long-distance opportunities; cross-market aspects, under the weakening trend of the US dollar, proper attention can be paid to positive opportunities.

Aluminum: From the perspective of spot prices, high smelting profits are not sustainable. However, the actual supply of Q3 is limited, and it is difficult for aluminum prices to decline in a trend when the stocks of the five places have fallen to 700,000 tons. It is expected that oversupply will be evident in Q4. However, due to the influence of the industry on the near-term end, the Back structure is difficult to dissipate under low inventory, and empty orders will be subject to loss of shifting positions. The current bearish logic needs to be verified by domestic stocks (whether it is the impact of imports or the weakening of downstream consumption). The futures main contract operating range is expected to be 12300-13700 yuan / ton. In terms of cross-market, the Shanghai-London ratio is high, focusing on the cross-market suit, and the return of the ratio is expected to come from the further increase in the price of Lum aluminum. In terms of intertemporal periods, the destocking in June will slow down, but whether inventory accumulation will still need to be observed (see the specific import volume in the second half of the year), the Back structure is expected to remain, but the price difference will shrink.

Lead: In the second half of the year, the domestic lead supply side was relatively stable compared to the second quarter, and the pressure on the demand side growth rate dropped. Comprehensive supply and demand ends, it is expected that the domestic supply of refined lead will exceed 70,000 tons in the second half of the year. From a year-on-year perspective, the global supply of refined lead was over 14,000 tons in the second half of last year, and the surplus in the second half of this year increased substantially year-on-year; Turn into surplus.

In terms of prices, the fundamentals of lead are worse than expected year-on-year or quarter-on-quarter. The current lead price is overestimated, and the downward pressure on lead price in the second half of the year is relatively high.

Zinc: Global zinc concentrate supply is expected to return to surplus in the second half of the year, and the surplus is expected to be 260,000 tons. From a year-on-year perspective, the global zinc concentrate supply exceeded 80,000 tons in the second half of last year, and the surplus in the second half of this year expanded substantially year-on-year; From shortage to surplus.

It is estimated that in the second half of the year, overseas refined zinc output will reach 4.15 million tons, an increase of 5.6% year-on-year, and China's refined zinc output will be 2.9 million tons, a year-on-year decline of 6.5%. Global refined zinc supply will be tightly balanced. From a regional perspective, excess pressure is still concentrated overseas, and the Chinese market is likely to continue to show shortages.

In terms of prices, continue to look at the macro-led direction, and fundamentals determine the rate of change. We tend to believe that in the second half of the year, zinc prices will still face greater pressure, and zinc is still a variety of non-ferrous varieties with short attributes.

Nickel: From the analysis of global supply and demand balance, it is expected that the supply of primary nickel will turn into surplus in 20 years, and we maintain the view that nickel prices fluctuate at a low level. However, after the continuous pullback of nickel prices in the first half of this year and falling below the production cost line of domestic ferronickel plants, the most difficult time in the industry chain may have passed. Although a significant increase in explicit inventory indicates that the demand for primary nickel has exceeded expectations, a sharp pullback in nickel prices in Shanghai has responded to some extent. For ferronickel, 900 yuan/nickel is the cost line of domestic low-cost ferronickel plants. Considering the demand premium of new energy for first-grade nickel and the premium of Shanghai nickel for nickel-iron, 20H2 Shanghai nickel has strong support around 90,000 yuan/ton.

In the intertemporal period, after the opening of nickel bean delivery, the problem of low delivery inventory was gradually solved. Under the background of surplus primary nickel supply and accumulation of inventories, we mainly focus on lending. Cross-market, the demand for pure nickel in stainless steel smelting has weakened, the dependence of nickel plates has decreased, and the frequency of opening of import windows has been reduced.

Tin: In terms of supply, the cumulative global supply increase in 2019 will be about 10%. Affected by the epidemic this year, the total supply of refined tin is expected to fall to about 296,000 tons, returning to the level of 2018. In terms of consumption, the total consumption in 2019 is about 3% lower than that in 2018, and this year's shutdown and production has also seriously affected downstream consumption and demand. It is expected that the total consumption of refined tin will drop to about 269,000 tons in 2020, the reduction is estimated to be around 10%.

Taken together, the refined tin market is still in shortage in recent months, the market has less circulating spot, and prices will have an upward trend for some time. However, until the impact of the epidemic is gradually eliminated, the above suppression is mainly due to excess capacity and sluggish demand, and tin will still return to the surplus situation. It is expected that the increase will be relatively limited, and it will return to a volatile trend later.

(Source: Shanghai Metal Network)