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Dry goods! Non-Ferrous Metal Review 2017 with 2018 Outlook

Update:2018.01.16
Summary:

If the non-ferrous metals market in 2017 is described i […]

If the non-ferrous metals market in 2017 is described in terms of one word, it means "a bull market continuation." Why is the continuation, because this wave of the bull market began in 2016, but at the end of 16 when the market is the beginning of this wave of rising bull market is not clear, and now look back, the performance of the market almost exceeded everyone's expectations Because there are too many "unexpected" factors affecting the non-ferrous metal market in the past 17 years. What are the reasons and what are the other factors that will affect the non-ferrous metals market in 2018? Please pay attention to the following.

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2017 Copper Market Review

Copper performance in 2017 eye-catching. This round of recovery, the start of the latest copper in all metals, the wave of pull up in 2016, the shock center from the previous 4700 US dollars rose to 5700 US dollars. The first five months of 2017 fluctuated in the range of $ 5500-6200. Due to the poor demand performance at the beginning of the year, the base metals recorded a relatively large correction in April-May. The copper price showed a relatively strong performance during this period, only a 10% retracement. This was not in line with the Escondida strike at the beginning of the year and the Grasberg mine failed to supply Shortage and look much market sentiment has a lot to do with. It is precisely because of this potential to see more power was pent-up the first half of the year, so that after the Chinese economy in May to determine the good, all the metal prices continue to rise, the copper on the momentum of the most powerful, from $ 5,700 quickly into the 6700 The new platform for the dollar, realized by two $ 1,000 platform leaps.

Copper supply in 2017 is tight. Copper suffered a strike at Escondida, the largest copper mine at the beginning of the year. Overlapping Freeport and the Indonesian government failed to reach an agreement on the future interest of Grasberg. Coupled with factors such as the drop in the grade of some copper mines and the impact of earthquakes on copper output, copper this year Loss rate is expected to exceed 5%, copper supply is tight.

Copper consumption was better than expected. China's demand growth for refined copper is better than the forecast at the beginning of the year. Northern Minerals estimates an annual growth rate of 4.7%. The strong performance of copper consumption, mainly due to the rapid rise of China's air-conditioning output. From January to November, China's total air-conditioner output rose 20% YoY.

In 2017, the global market as a whole is in tight balance. Copper shortages did not significantly transfer to the refined copper side, on the one hand, the continuous depletion of copper concentrate inventories, on the other hand, the spread between scrap copper and refined copper, copper consumption increased, but also make up for lack of copper concentrate, therefore , We did not see a substantial drop in inventories.

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2018 copper market outlook

Copper supplies have eased, but supply increases may not be as expected. We think the risk of the copper mine producing less than expected next year far outweighs the more than expected risk and the yield loss rate will likely be untenable 5% next year. There will be a lot of labor negotiations next year, all of which are points of concern for the supply side of the copper mine next year.

Copper scrap may become the last building block to influence and even determine the copper balance next year. Why do you say that? Because of the balance of copper, the annual shortage or surplus in these years is between 200,000 and 300,000 tons. China banned the import of 7 types of waste from 2019, while the waste of 7 types contained 700,000 tons of copper and the reduction of half that of next year was 350,000 tons. Therefore, the situation of scrap copper imports next year is a point that needs close attention, and market sentiment will be felt for a period of time.

Consumption declined due to the weakening of real estate and infrastructure. China's consumption growth rate will be 4% in 2017 and 2.5% in 2018. Although the economic growth in Europe and the United States is expected to be good, the increase in metal consumption will be limited. Therefore, the global consumption will be dragged down by the slowdown of China's consumption growth. Copper drag the most important factor.

2018 copper and metals will be tight balance of the market, the price Xianyihouyang. In a well-balanced market, it is likely that an unexpected factor will determine the direction of the copper. The aforementioned copper and scrap copper supply events may be about a certain stage of the copper trend. From now on, we think the market will pay more attention to the macro side in the first half, that is, whether the Chinese economy will decline. In other words, metal demand will not deteriorate. In the second half of the year, the market will turn to the supply side , Gradually began to worry about the future tension in copper supply. Therefore, copper prices Xianyihouyang, showing V-shaped trend.

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2017 Aluminum Market Review

The aluminum market in 2017 continued its rally. In 2017, driven by the two major policies of China in terms of production capacity and strong environmental protection, the domestic and overseas aluminum markets rose in tandem. As of the end of December 2017, the international market saw an increase of 26.6% in aluminum prices and 17.5% in the domestic market.

The aluminum market in 2017 is dominated by China's policies. In the first half of the year, the state successively promulgated two major policies, namely the "Work Plan for the Clean-up and Reorganization of Illegal and Illegal Projects in Electrolytic Aluminum Industry" (Circular 656) and the "Measures for the Prevention and Control of Atmospheric Pollution in Beijing-Tianjin-Hebei and Surrounding Areas" (2 + 26 Policy ). Affected by the two major policies, China's electrolytic aluminum production capacity and output fell month by month since June. However, due to the soaring aluminum prices, which stimulated the re-commissioning of partially-compliant newly-built production capacity and the re-production of idle capacity, the output of electrolytic aluminum in China also increased sharply by 12.2% to 36.5 million tons throughout the year. As a result of China's move, the global electrolytic aluminum production also soared 7% to 63.8 million tons.
Aluminum consumption surpassed expectations. Aluminum consumption growth in 2017 is estimated at about 8.5%, much higher than the forecast of 6.5%. Overall, household appliances and transportation support aluminum consumption. However, from a global perspective, the consumption in other countries and regions in China shows a good momentum of consumption, with strong growth in consumption of aluminum in 2017.

In 2017, the global primary aluminum market continues to be short of supply, but the Chinese market is apparently oversupplied. Despite good consumption in China and other parts of the world and China's electrolytic aluminum production has been constrained by two major policies, the aluminum electrolytic aluminum market in China still shows a large surplus in the whole year while the shortage in the international market still exists. The reason why there is a big surplus in the Chinese market lies in the fact that the above two major policies exert their force in the second half of the year, especially in the fourth quarter. In the first three quarters, the output of electrolytic aluminum in China plummeted in light of the soaring price of aluminum, and the market supply repeatedly exceeded the demand.

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2018 aluminum market outlook

Both production and consumption growth slowed down. From the perspective of production, the impact of stop-breaking production capacity in 2017 and the decrease in winter aluminum smelters will be fully reflected in 2018. Taking into account the seriousness of the policy and the complexity of capacity replacement, nearly 4 million tons / year smelting capacity stopped in 2017 will not resume production immediately. On the contrary, it is doubtful if nearly 900,000 tons / year of capacity suspended during the heating season can be restarted soon after the heating season. Although there are still more than 3 million tons / year of new or deferred electrolytic aluminum capacity production plans to go into operation in 2018, whether these projects can be put into operation on time under the slogan of No. 656 also carries a question mark. It is estimated that the growth rate of electrolytic aluminum production in China will drop to less than 4% in 2018. The output outside China has obviously accelerated, but it has little effect on the global pattern.

Aluminum consumption in 2018 will experience triple constraints. First, real estate investment and new home starts falling; Second, infrastructure cooling; Third, the slowdown in export of aluminum. The last point is related to the U.S. impediments to China's export of aluminum products in the recent year. However, the slowdown of China's economic growth is limited, and the strong economic growth in developed countries will itself drive the consumption of aluminum. Therefore, the growth of aluminum consumption in China is expected to drop by 2% to 6.5% while the global aluminum consumption will fall by less than 1%.

Supply and demand in the Chinese market tends to be balanced, and the global market gap widens. It is estimated that the rate of decline in electrolytic aluminum production in China will exceed that of consumption in 2018, eventually leading the domestic aluminum market to strike a balance. Judging from the global market, the slight increase of production in China and the stagnation of the export of aluminum in China are hardly compensated by the increase of output outside China. As a result, the global market gap has once again expanded to more than 1 million tons.

Aluminum bottomed rebound, narrowing range. Based on the above judgment of supply and consumption, the fundamentals of China and the global electrolytic aluminum market will be greatly improved by 2018 compared with 2017. If China's aluminum price increase in mid-to-large overdraft policies in 2017, the price of aluminum plummeted from RMB17,250 / tonne to RMB14,000 / tonne since November, the water has been fully squeezed out. Once the normal recovery of consumption comes into Q2, the aluminum price is likely to resume its upward trend, and LME aluminum prices will rise faster than domestic ones.

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2017 Zinc Market Review

Zinc prices in 2017 continued to take cattle. In 2017, the price of zinc continued its bull market. Although it did not go up like a straight line in 2016 and saw a 20% retracement in the first and second quarters in 2017, it continued from the tight zinc mine and the better-than-expected favorable and low inventory stimulus of China's economy Higher and hit its highest point of $ 3,326 on November 1.

Zinc supply continued to be tight in 2017 and conducted to the metal end. There are two main reasons for the zinc shortage in 2017: First, the output of zinc concentrate in China is less than expected. Environmental inspections largely eliminated the restart of small mines, making high zinc prices lower zinc ore output can not be restored, while other new production capacity due to a variety of reasons, the slow release of resources in production mines have also declined. Second, foreign mines enter the gap between the old mines closed and the new mines put into operation. As zinc prices weakened after the financial crisis, foreign mining companies are not enthusiastic about zinc exploration and development of new mines. These reductions will decline in 2016-2017 with the closure of large mines such as Century and the decline in production by Glencore The yield is hard to make up.

Zinc consumption without dazzling performance, but not bad. From China's galvanized output and export data, the consumption of zinc in China is not very eye-catching, narrowing the year-on-year growth and negative growth in a few months. Terminal consumption benefited from better than expected overall performance of the Chinese economy with moderate growth.

In 2017, the global market has a large gap from zinc ore to metal. As the mine continued to be tight, depletion of zinc ore stocks, smelters operating rate was significantly disrupted. The tension of the mine is directly transmitted to the metal end. The expected metal shortfalls of various agencies are in the range of 40-70 million tons. Such a gap is also reflected in the slump in inventories of zinc ingots.

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2018 zinc market outlook

Zinc ore supply tends to balance, but short-term supply remains tight. First, although a large number of zinc mines will increase in 2018, subject to a drop in the grade of the mined gold mines and the closure of some small mines, the actual net increase is not large. Second, the actual amount of domestic new increment in each of the past few years is less than estimated. We expect that the domestic newly increased amount in 2018 will also be greatly reduced with the estimated output of 250,000 tons. Thirdly, mines such as Gamsberg and New Century did not provide an increase in the zinc ore market in the first half of the year, and many mines in the country also put their output in the second half of the year.

Zinc consumption growth continued to decline, but still maintain a 1-2% growth rate. Zinc consumption will grow slightly under the negative impact of China's moderate economic downturn and stimulated by the global economic recovery led by Europe and the United States.

Smelting capacity in 2018 will not be a bottleneck. The next three years, the bottleneck of zinc smelting capacity has been more and more concerned about the industry due to poor long-term benefits, coupled with lead pollution problems, lead and zinc smelting capacity in recent years almost no new capacity. However, as the concentrate is still limited in 2018, the bottleneck of smelting capacity will not be a factor in determining the zinc market in the short term.

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2017 lead market review

2017 price of lead Xianyihouyang. In 2017, the price of lead was affected by the global economic recovery. It rebounded under the lead of copper, zinc and other leading products. 2-5 shocks downstream, down about 20%, after the shock upstream, the highest rose to 2621 US dollars on October 4, then fluctuated within a narrow range between 2400-2570 US dollars.

Lead ore supply is still tight. Due to the lead-zinc associated, the pattern of lead ore supply in 2017 is similar to that of zinc ore, showing a tight situation. The concentrate gap in China will be about 80,000 tons in 2017, an expansion from 2016, with a global deficit of 25,000 tons. Regeneration of lead industry changes, accounting for increased year by year. The proportion of recycled lead in the world is more than 70% and the domestic market has now risen from 35% to over 40%. In the future, with the slowdown of consumption and the increase of stock volume, the proportion of recycled lead will increase rapidly.

Lead-acid battery consumption has no growth. From the output of lead-acid batteries, January-October lead-acid battery output in China fell 1% year on year, narrowed from January to September narrowed, the annual output is expected to be flat with last year.

In 2017, there is a slight gap between global gneiss and metals. Due to the lead-zinc associated, when the zinc mine was greatly tense, the lead mines also experienced a small shortage of about 30,000 tons. However, due to the recovery of primary ore by reclaimed lead, the smelted products could still basically meet the downstream demand, and the metal end only showed 20,000 tons gap.
2018 lead market outlook

Lead-acid battery consumption is facing a greater impact. Lead consumption of 80% concentrated in the field of lead-acid batteries, of which lead-acid batteries for automobiles and electric bicycles account for more than 50% of all lead-acid batteries. The global electric car revolution has started, the drag on the lead-acid battery is self-evident. The sales volume of China's electric bicycles has also shown a trend of declining saturation. The emergence of shared bicycles has further suppressed the consumption demand of electric bicycles. We also see that from the policy point of view, starting from 2016, the state levies a 4% consumption tax on lead-acid batteries, and the state seems to be disadvantageous to lead-acid batteries in policy direction.

Both lead and metals will show a slight surplus. With the start of recovery of lead-zinc supply in 2018, the output of mineral lead will increase. At the same time, recycled lead next year put into operation more concentrated in the second half, recycled lead production will also maintain growth. After consumption gradually shifted from incremental consumption to stock consumption, the balance of lead began to change from a slight shortage to a slight surplus.

Lead prices continue to be weaker than zinc prices. Unlike the optimism of zinc, we are more pessimistic about lead prices. If the time scale is widening, the price of lead does not jump out of the fluctuating range of 1600-2800 USD since 2010, which is obviously weaker than the price of zinc. This essentially reflects the gradual increase in the proportion of recycled lead and the "spent spent" The adverse effect of lead on the price of lead.

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Analysis of influencing factors
First, the growth of austenitic stainless steel production will support the robust demand for nickel resources in China and the world. Since 1913, austenitic stainless steel has always played the most important role in stainless steel. Its production and usage account for about 70% of the total stainless steel production and usage. According to CRU data, the average annual output of austenitic stainless steel will rise from 8 million tons / quarter to 11 million tons / quarter in the next five years. Among them, China's contribution will be more than 50%.

Second, the strong demand for battery materials in the new energy sector will become a new impetus to China's nickel demand. Due to strong investment in new energy vehicles in China, the strong demand of new energy sources for power batteries and ternary materials will become another growth point for nickel demand in China and the world at large. In particular, China's leading role in the global new energy vehicles and power battery industry, China's demand for nickel in the battery industry will grow faster than the world average.
Supply and Demand Balance and Future Price Trend Analysis.

According to CRU data, since the third quarter of 2015 China's supply and demand gap has been increasing. Meanwhile, with the economic recovery in China and the continuous development and exploration of China in new materials and new energy fields, the demand for nickel in China will also remain strong . In the next five years, China's demand for nickel metal will directly lead to the continued shortage of global nickel metal supply in the coming period.

According to the price cost percentile analysis, the global nickel mine in 2016 had a 25-cent bit line of 8,600 U.S. dollars / ton, a 40-point price level of 9,100 U.S. dollars / ton and a 60-cent price level of 11,100 U.S. dollars / ton. Separation price level of 12,600 US dollars / ton. According to industry statistics, the average production cost of nickel pig iron in the world is $ 13,000 / tonne.

It can be said that the price of nickel has undergone a long-term bottom shock. With the development of China's economy and the "bull market" in the longer term of the Chinese steel industry, the price of nickel has been gradually out of the bottom of the shock zone since the second half of 2017 Resume climbing up. In the next 5 years, the market of nickel price will also follow the curve of changes in the global steel industry and come out of the market that is more compatible with steel. It is expected that in 2018, nickel prices will fluctuate between 60-80 cent bit lines up to 11100-12600 US dollars / ton.