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Nonferrous Metal Industry: grasp the pro cycle and
In 2020, nonferrous metals will be restrained first and then improved. In the first ten months, the net profit of nonferrous metal mining and processing, nonferrous metal smelting and rolling achieved positive growth. The price of industrial metals rebounded strongly in the second quarter, and the prices of major varieties increased significantly compared with that at the beginning of the year. The price of precious metal gold rose in the first three quarters. The secondary market performance of nonferrous metals in the second half of the year is better than that in the first half. As of December 10, 2020, the nonferrous metal plate has increased by 23%, ranking 11th among the 28 sub industries of Shenwan. At present, the valuation of nonferrous Pb and PE is close to the historical average level, and it is expected that the driving force of the industry in the future may mainly come from the improvement of profitability.
Grasp the pro cycle and optimize the track in 2021
We believe that in 2021, the nonferrous metals industry is facing a favorable background of still loose liquidity, rising demand and low inventory, and the industry boom is worth looking forward to. In 2021, nonferrous metals can grasp two main investment lines: first, pro cyclical industrial metals benefit from economic recovery, prices are expected to remain relatively strong, and pay attention to copper and aluminum with better pattern; second, the beneficial policies and industrial upgrading of energy metal lithium cobalt and titanium materials in new metal materials have large growth space, and the investment value of relevant leading companies is highlighted.
Copper and aluminum prices are expected to maintain a high level in 2021 due to the recovery of industrial metal demand and low inventory. It is estimated that with the recovery and consolidation of domestic demand and the recovery of overseas demand in 2021, the growth rates of global and Chinese refined copper demand will be 2.9% and 2.0% respectively, which will return to the pre epidemic level, and the copper inventory will be relatively low in 2017, and the copper price is expected to remain at a high level in 2021. In the copper industry chain, the supply of copper is relatively orderly, and the effective supply of new projects in 2021 is limited, which benefits from higher copper price. It is estimated that in 2021, with the resonance of domestic and international market demand, the demand for electrolytic aluminum in the world and China will increase by 6% and 2% respectively, returning to the pre epidemic consumption. It is estimated that in 2021, alumina, the raw material of electrolytic aluminum, will suffer from overcapacity and the price will not be strong. The new capacity of electrolytic aluminum can be controlled, and the inventory is at a low level, which is conducive to the strengthening of aluminum price, and the high profit level of electrolytic aluminum is expected to be maintained.
Focus on energy metal and titanium sub industry
With the recovery of production and sales of new energy vehicles, the demand for energy metals will resume a rapid growth in 2021, and the medium and long-term growth and growth will be determined and the space is large. In terms of supply, under cost constraints, the supply of energy metal cobalt and lithium shrinks and tends to be rational. It is expected that the price center will move up in 2021. Benefiting from the continuous increase of defense expenditure, the installation of new fighters and the industrialization of domestic large aircraft, it is expected that the demand for medium and high-end titanium materials in China will be strong, which will promote the rapid growth of titanium demand. It is estimated that the compound growth rate of titanium demand in China will be 8.2% from 2020 to 2025, maintaining a high prosperity. At the same time, with the continuous improvement of industry concentration, leading enterprises with scale and first mover advantages are facing better development opportunities.
It is expected that liquidity will remain loose in 2021, but the space for further easing will be narrowed, and the driving force of the dollar to fall will be weakened, which will push the marginal reduction of gold price. In addition, partial investment in gold ETF gold positions continue to remain high, but further increase in the momentum weakened. We believe that gold prices will tend to be volatile in 2021, but we need to pay attention to inflation changes. If inflation exceeds expectations, the return on holding gold will be re valued.
Investment advice
We expect liquidity to remain relatively loose in 2021, but the marginal effect will weaken, and the industry driver will shift from liquidity to supply and demand. It is expected that under the background of low inventory and demand recovery, the price of industrial metals is expected to remain relatively strong, and the industry rating will be upgraded from "neutral" to "stronger than the market". It is suggested that attention should be paid to the recovery of demand and orderly supply. Zijin mining, western mining and Yunnan Aluminum Co., Ltd., which are the leading industrial metal enterprises with new projects put into operation, are recommended. At the same time, the demand for energy metals in new metal materials has improved, and the long-term growth space is large. The industry is at the bottom and has high configuration value. It is suggested to pay attention to Huayou cobalt industry and Shengxin lithium energy. Driven by the medium and high-end fields, the demand for titanium materials continues to increase, leading enterprises have the first mover advantage, so it is recommended to pay attention to BaoTi.
Risk tips: 1) the risk of low demand. If the epidemic situation is not effectively controlled in the future, the economic recovery is weak, fixed investment and consumption are sluggish, or international trade disputes increase, the demand for non-ferrous metals will be greatly affected, and further affect the prosperity of the nonferrous industry and the profitability of related companies; 2) supply side reform and environmental protection policies are lower than expected risks. If the future supply side reform and environmental protection policy changes or the implementation effect is lower than expected, it will weaken the effectiveness of the supply side reform, and the nonferrous industry may fall back into the state of overcapacity; 3) the risk of price and inventory fluctuations. If the price and inventory of nonferrous metals fluctuate greatly due to expected and unexpected factors in the future, it will have a significant impact on the operation and profitability of nonferrous metals companies; 4) the risk of liquidity contraction. Although it is likely that liquidity will remain loose in the short term, if inflation goes up beyond expectations in the future, monetary policy may be tightened, which will depress the price of non-ferrous metals.
 
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