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New situation of nonferrous metals
New situation of nonferrous metals

Nonferrous metals mainly have financial attributes and industrial attributes, which determine the different logic drivers between metals.

First popularize a concept. Metals can be divided into ferrous metals and non-ferrous metals. Ferrous metals are the metals in the iron and steel industry chain, mainly iron, chromium and manganese, while metals other than ferrous metals are called non-ferrous metals.

Therefore, to be exact, nonferrous metals do not include iron. The following is mainly about nonferrous metals.

Nonferrous metals have two main attributes: financial attribute and industrial attribute.

The financial attributes are mainly reflected in US dollar pricing and anti inflation, and its price is often negatively correlated with the US dollar index.

The industrial attribute emphasizes the supply and demand fundamentals of related metals, which is directly related to supply and demand.

According to the strength of financial and industrial attributes, nonferrous metals can be divided into three categories: precious metals, large industrial metals and rare small metals.

Precious metals: their prices are mainly determined by their financial attributes, and their prices are often negatively correlated with the US dollar index. The typical varieties are gold and silver.

Due to the strong financial attributes, the prices of gold and silver are greatly affected by monetary and fiscal policies.

When the monetary and fiscal policies are released substantially, the market inflation expectation is stronger, the dollar is weaker, and the financial attribute of gold is highlighted, and the price of gold rises; on the contrary, when the monetary and fiscal policies shrink, the market inflation expectation weakens, the US dollar strengthens and the gold price falls.

Silver is also a precious metal, which has always been the shadow of gold. However, due to its industrial attributes, silver tends to strengthen its industrial attributes in the early stage of economic growth, and the price rise elasticity may be higher. Therefore, there is a saying that gold investment and silver speculation.

Large categories of industrial metals: the price is mainly dominated by the industrial attribute, and the financial attribute will affect the price. The typical varieties are copper, aluminum, lead and zinc.

Most commodities are priced in US dollars, so industrial metals also have some financial attributes. Reflected in the price, when the dollar weakens, most commodity prices rise. Among them, copper has higher financial attributes than other metals, which also leads to copper being more sensitive to macroeconomic and policy than other industrial metals.

But generally speaking, industrial metals are still closer to industrial demand, and the supply and demand fundamentals of their categories are the main factors determining their prices. The downstream demand for industrial metals is relatively scattered, so the macroeconomic situation is an important indicator to reflect the demand for industrial metals.

Rare and small metals: the variety price, especially the relevant stock price, basically depends on the supply and demand fundamentals of the industry. The typical varieties are rare earth, titanium, zirconium, cobalt, lithium, etc.

Taking rare earth as an example, rare earth is an important strategic resource in China, and its price is greatly affected by the crackdown on illegal activities, collection and storage, and national policies. On the one hand, the plate is affected by the price of rare earth, on the other hand, it has the nature of counter control.

The law of nonferrous metals rising

First, look at the current stage. The core of inflation trading stage is precious metals, and the core of demand driven stage is industrial metals.

In fact, from the perspective of futures prices, in each macroeconomic cycle, nonferrous metals prices have two rounds of rising period.

In the first round, money began to release water and inflation expectations increased, which first stimulated a sharp rebound in futures prices;

In the second round, the economy began to recover, and the expected increase in downstream demand drove up prices.

Take copper futures as an example. From March to June this year, the rise of copper futures was mainly stimulated by the release of water by the Federal Reserve. In less than four months, the price of copper rose by nearly 50%; since October this year, the rise of copper futures was driven by economic recovery and rising demand expectations, with a cumulative increase of about 20% since October.

From the performance of related sectors, in the inflation trading stage, gold and silver stocks performed better, while the futures prices of other industrial metals rose sharply, but the stock prices were flat;

In the demand driven stage, gold and silver stagnated or even fell, while industrial metals futures not only continued to rise sharply, but also showed obvious performance in stock prices.

Second, we should find varieties with better fundamentals in each stage, especially in the demand driven stage. We should find varieties with better comprehensive supply and demand and inventory fundamentals. The better the fundamentals, the greater the elasticity of the plate.

For example, in this wave of demand driven stage, the core rising varieties are copper, aluminum and cobalt lithium new energy metals.

On the one hand, the inventory of copper and aluminum is at the bottom of recent years, on the other hand, the demand continues to benefit from the high outlook of home appliances, automobile, consumer electronics and other industries. (please refer to "sudden, super good news" on November 9!

New energy metals such as cobalt and lithium, not to mention, are mainly driven by the demand for new energy vehicles.

Third, in the same sector, to find the most beneficial companies, such as the output per unit market value, production capacity or reserves, including whether there is an expansion expectation, these are the core factors that will lead to the rise of relevant stocks.

For example, the western mining industry led the rise this time, which is mainly due to the fact that the copper production capacity of the western mining industry will reach 179000 tons after it is put into operation in 2020, with a significant increase of 265% year-on-year. In the aluminum plate, Shenhuo shares and Yunan aluminum shares, which have outstanding performance, will also expand production by 50% and 110% this year.

Industrial metals with good supply and demand pattern

Copper: tight supply + strong demand + low inventory, futures price trend upward.

From the supply side, the copper concentrate processing cost TC has reached a new low, and the lower the processing fee, the more tense the supply at the ore end, and the smelter is forced to reduce the processing cost; from the demand side, the demand for home appliances, automobiles and consumer electronics is still strong.

Under tight supply and demand, the global dominant copper inventory continued to decline. On December 16, LME copper inventory decreased by 8775 tons, the largest decline since May. Domestic inventories in the previous period hit the same level in nearly five years
 
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