If the non-ferrous metals market in 2017 is described in one word, it is "the continuation of the bull market." Why is it said to be a continuation? Because this wave of bull market started in 2016, but at the end of 2016, the market did not know that this wave of rise was the beginning of the bull market. Looking back now, the market’s performance has almost exceeded everyone’s expectations. , Because there are too many "unexpected" factors affecting the non-ferrous metal market in 2017. What are the reasons and what factors will affect the non-ferrous metal market in 2018, please pay attention to the following.

2017 Copper Market Review

The performance of copper prices in 2017 was eye-catching. In this round of recovery, the price of copper was the latest to start among all metals. After a surge in 2016, the shock center rose from the previous US$4,700 to US$5,700. The first five months of 2017 fluctuated in the range of 5500-6200 US dollars. Due to the poor demand performance at the beginning of the year, the base metals have undergone a significant correction in April-May, and the copper price has been relatively strong during this period, with only a retreat of about 10%. This is due to the failure of the Escondida strike at the beginning of the year and the unsuccessful negotiation of the Grasberg mine. The shortage has a lot to do with the bullish market sentiment. It is precisely because of this potential bullish momentum that was suppressed in the first half of the year that after May, China's economy was determined to be positive, and when all metal prices began to continue to rise, the upward momentum of copper prices was the strongest, from 5700 US dollars to 6700 soon. The new platform of the US dollar has realized the leap of two US$1,000 platforms.

The supply of copper mines was tight in 2017. Copper suffered a strike at Escondida, the largest copper mine at the beginning of the year, and Freeport and the Indonesian government failed to reach an agreement on the future rights and interests of Grasberg. In addition, factors such as the decline in the grade of some copper mines and the impact of earthquakes on copper mine output have resulted in this year’s copper mine. The loss rate is expected to exceed 5%, and the supply of copper ore is tight.

Copper consumption was better than expected. The growth rate of China's refined copper demand is better than the forecast at the beginning of the year, and the Beijing Mining Research Institute estimates the annual growth rate of 4.7%. The strong performance of copper consumption is mainly due to the rapid increase in China's air-conditioning production. From January to November, the cumulative year-on-year growth rate of China's air-conditioning production reached 20%.

In 2017, the global market as a whole was in tight balance. The shortage of copper ore has not been significantly transmitted to the refined copper side. On the one hand, the inventory of copper concentrates is constantly being consumed. On the other hand, the price difference between scrap copper and refined copper has widened, and the increase in scrap copper consumption has also made up for the shortage of copper concentrate. , We did not see a significant drop in inventory.

2018 Copper Market Outlook

The tight supply of copper mines has eased, but the increase in supply may be less than expected. We believe that the risk that the copper mine's output next year is less than expected is far greater than the expected risk, and the output loss rate of 5% next year may be unstoppable. There will be a lot of labor-management negotiations next year, and these are the points that need to be paid attention to on the supply side of the copper mine next year.

Scrap copper may become the last building block that affects or even determines the copper balance next year. Why do you say that? Because of the balance of copper, the annual shortage or surplus in these years has been two to three million tons. China has banned the import of waste 7 categories from 2019. The copper content of waste 7 categories is 700,000 tons, which will drop by half next year to 350,000 tons. Therefore, the situation of scrap copper imports next year is a point that needs to be closely watched, which will influence market sentiment for a period of time.

The growth rate of consumption declined due to the weakening of real estate and infrastructure. In 2017, China’s consumption growth rate was 4%. In 2018, we expect it to be around 2.5%. Although the European and American economies have better expectations, the increase in metal consumption is limited. Therefore, global consumption will be dragged down by the slowdown in China’s consumption growth. The most important factor dragging down copper.

In 2018, both copper mines and metals will be tightly balanced markets, with prices falling first and then rising. In a tightly balanced market, it is likely that a sudden factor will determine the direction of copper. The aforementioned copper mine and copper scrap supply events may affect the trend of copper at a certain stage. Forecasting at this point in time, we believe that the market will pay more attention to the macro perspective in the first half of the year, that is, will China’s economy decline, in other words, will the demand for metals deteriorate; in the second half of the year, the focus of the market will shift to the supply side. , Gradually began to worry about the tight supply of copper mines in the future. Therefore, the price of copper fell first and then rose, showing a V-shaped trend.

2017 aluminum market review

The aluminum market continued to rise in 2017. In 2017, driven by China's two major policies to reduce production capacity and strengthen environmental protection, the domestic and foreign aluminum markets rose together. As of the end of December 2017, the price of aluminum in the international market has risen by 26.6%, and the price of aluminum in the domestic market has risen by 17.5%.

In 2017, the aluminum market was dominated by Chinese policies. In the first half of the year, the state successively issued two major policies, namely the "Special Action Plan for Cleaning up and Rectifying Illegal Projects in the Electrolytic Aluminum Industry" (Circular 656), and the "Measures for the Prevention and Control of Air Pollution in the Beijing-Tianjin-Hebei and Surrounding Areas" (2 26 policies) . Affected by two major policies, China's electrolytic aluminum operating capacity and output have declined month by month since June. However, due to the soaring aluminum price, which stimulated the commissioning of some compliant new capacity and the resumption of idle capacity, China's electrolytic aluminum production for the whole year increased by 12.2% to 36.5 million tons. Driven by China, the global electrolytic aluminum production also soared. 7% to 63.8 million tons.
Aluminum consumption exceeded expectations again. The growth rate of aluminum consumption in 2017 is estimated to be around 8.5%, which is much higher than the 6.5% forecast. Generally speaking, the home appliance and transportation industries support aluminum consumption. From a global perspective, the consumption momentum of countries and regions outside of China is good, and aluminum consumption has experienced strong growth in 2017.

In 2017, the global primary aluminum market continued to be in short supply, but the Chinese market was clearly surplus. Although the consumption situation in China and other parts of the world is good, and China's electrolytic aluminum production has been restricted by two major policies, the Chinese electrolytic aluminum market still has a large surplus throughout the year, and the shortage in the international market still exists. The reason why there is a large surplus in the Chinese market is that the time for the above two major policies to be concentrated in the second half of the year, especially the fourth quarter. In the first three quarters, China's electrolytic aluminum production has rebounded linearly under the incentive of the soaring aluminum price, and market supply has repeatedly exceeded demand.

2018 aluminum market outlook

Both output and consumption growth have slowed down. From the perspective of production, the impact of the suspension of illegal production capacity in 2017 and the reduction of production in winter aluminum plants will be fully reflected in 2018. Taking into account the seriousness of the policy and the complexity of capacity replacement, the nearly 4 million tons/year smelting capacity that was suspended in 2017 will not resume production immediately. On the contrary, it is doubtful whether the nearly 900,000 tons/year production 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 newly-built or delayed electrolytic aluminum production capacity planned to be put into production in 2018, under the remnants of Document 656, whether these projects can be put into production on schedule is also questionable. It is predicted that the growth rate of China's electrolytic aluminum production in 2018 will drop to less than 4%. Production outside China has accelerated significantly, but it has little impact on the global pattern.

Aluminum consumption will encounter triple constraints in 2018. The first is the decline in real estate investment and new housing starts; the second is the cooling of infrastructure; the third is the slowdown in aluminum exports. The last point is related to the various obstacles imposed by the United States on China's aluminum exports in the past year. However, the slowdown in China's economic growth is limited, and the strong economic growth in developed countries itself will drive aluminum consumption. Therefore, it is expected that China's aluminum consumption growth will fall by 2 percentage points to 6.5%, while global aluminum consumption will fall by less than one percentage point.

Supply and demand in the Chinese market tend to be balanced, and the global market gap has widened. It is expected that the decline in China's electrolytic aluminum production will exceed the decline in consumption in 2018, which will eventually lead to a balance in the domestic aluminum market. From the perspective of the global market, the small increase in China's output and the stagnation of China's aluminum exports can hardly be compensated by the increase in output outside of China. Therefore, the gap in the global market has once again expanded to more than one million tons.

Aluminum prices bottomed out and the fluctuation range narrowed. Based on the above judgments of supply and consumption, compared with 2017, the fundamentals of China and the global electrolytic aluminum market have greatly improved in 2018. If China's aluminum price increase in 2017 has overdrafted the policy and it is very positive, then the aluminum price has fallen sharply from 17,250 yuan/ton to below 14,000 yuan/ton since November, which has fully squeezed out the water. Once consumption shows a normal recovery after entering the second quarter, aluminum prices may resume rising, and LME aluminum prices will rise faster than domestic prices.

2017 zinc market review

In 2017, zinc prices continued to rise. In 2017, the price of zinc continued to be bullish. Although it did not go up straight like 2016 and saw a 20% retracement in the first and second quarters, it has since continued to be stimulated by the tight zinc mines, the better-than-expected Chinese economy, and low inventories. Going higher and hitting a high of $3326 for the year on November 1.

In 2017, the supply of zinc ore continued to be tight, and it was transmitted to the metal end. There are two main reasons for the shortage of zinc ore in 2017: First, the output of zinc concentrate in China is lower than expected. Environmental supervision has largely prevented the restart of small mines, making it impossible to recover zinc mine production under high zinc prices. At the same time, other new production capacity has been released slowly due to various reasons, and the resource endowment of the mines in production has also declined. Second, foreign mines have entered a gap period between the closure of old mines and the commissioning of new mines. Due to the weak performance of zinc prices after the financial crisis, foreign mining companies are not enthusiastic about zinc mine exploration and the development of new mines. With the closure of large mines such as Century, and the artificial reduction of Glencore's production, these decreases in 2016-2017 The output is hard to make up.

Zinc consumption has no outstanding performance, but it is not bad. Judging from China's zinc production and export data, China's zinc consumption data is not eye-catching. The year-on-year growth rate has narrowed, and there has been a negative growth in individual months. Terminal consumption benefited from the overall better-than-expected performance of the Chinese economy, with moderate growth.

In 2017, the global market has a large gap from zinc ore to metal. Due to the continued tension at the mine end, the zinc mine inventory has been exhausted, and the operating rate of the smelter has been significantly disturbed. The tension of the mine is directly transmitted to the metal end. The metal gaps predicted by different institutions range from 400,000 to 700,000 tons, and such gaps are also reflected in the decline in zinc ingot inventories.

2018 zinc market outlook

The supply of zinc ore tends to balance, but short-term supply is still tight. First, although there was a lot of increase in zinc mines in 2018, due to factors such as the decline in the grade of producing mines and the closure of some small mines, the actual net increase was not much. Second, the actual domestic new additions in recent years have been less than expected. We expect that the domestic new additions in 2018 will also be greatly reduced under the estimated output of 250,000 tons. Third, Gamsberg, New Century and other mines could not provide an increase in the zinc ore market in the first half of the year, and many domestic mines also released production in the second half of the year.

The growth rate of zinc consumption continues to decline, but still maintains a growth rate of 1-2%. Zinc consumption will increase slightly due to the negative impact of China's moderate economic downturn and the global economic recovery led by Europe and the United States.

Smelting capacity will not become a bottleneck in 2018. In the next three years, the bottleneck of zinc smelting capacity has attracted more and more attention from the industry. Due to poor long-term benefits and lead pollution, lead-zinc smelting capacity has hardly added much new capacity in recent years. However, as concentrates are still limited in 2018, the bottleneck of smelting capacity will not become a factor in determining the zinc market in the short term.

2017 Lead Market Review

In 2017, lead prices fell first and then rose. In 2017, the lead price was affected by the global economic recovery, led by leading varieties such as copper and zinc, showing a recovery trend, first declining and then rising, with greater volatility during the year. From February to May, it fluctuated downward, with a decrease of about 20%. After that, it fluctuated upward. It rose to 2621 US dollars on October 4, and then fluctuated within a narrow range between 2400-2570 US dollars.

The supply of lead ore is still tight. Due to the co-generation of lead and zinc, the supply pattern of lead ore in 2017 is similar to that of zinc ore, showing a tighter situation. The gap in China's concentrate was about 80,000 tons in 2017, which is expanding compared with 2016, and the global gap is about 25,000 tons. , The regenerated lead industry has undergone tremendous changes, and its proportion has increased year by year. The proportion of recycled lead production in the world exceeds 70%, and the domestic production has now risen from 35% to more than 40%. In the future, as consumption slows down and accumulation increases, the proportion of recycled lead will increase rapidly.

There has been no growth in lead-acid battery consumption. From the perspective of lead-acid battery output, China's lead-acid battery output fell by 1% year-on-year from January to October, which is narrower than the January-September period. The annual output is expected to be the same as last year.

In 2017, there was a small gap in global lead mines and metals. Due to the associated lead and zinc, when the zinc mines are greatly stressed, there is a small shortage of lead mines, about 30,000 tons. However, due to the replenishment of primary ore by recycled lead, the smelted products can basically meet the downstream demand, and the metal end is only present. A gap of 20,000 tons.
2018 Lead Market Outlook

The consumption of lead-acid batteries is facing a greater impact. 80% of lead consumption is 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 vehicle revolution has started, and the drag on lead-acid battery consumption is self-evident. The sales of electric bicycles in China have also shown a trend of saturation and decline. The emergence of shared bicycles has further suppressed the consumer demand for electric bicycles. We have also seen that in terms of policy, the state has imposed a 4% consumption tax on lead-acid batteries since 2016, and the country’s policy orientation also seems to be unfavorable for lead-acid batteries.

There will be a slight surplus of lead ore and metals. As the supply of lead-zinc mines begins to show a recovery growth in 2018, the output of mineral lead will increase. At the same time, the newly put into production projects of secondary lead next year will be more concentrated in the second half of the year, and the output of secondary lead will also maintain growth. After consumption gradually shifted from incremental consumption to stock consumption, the balance of lead began to turn from a small shortage to a small surplus.

Lead prices continue to be weaker than zinc prices. Unlike zinc's optimism, we are more pessimistic about lead prices. If the time scale is enlarged, the price of lead has not jumped out of the fluctuation range of US$1600-2800 since 2010, and the performance is significantly weaker than the price of zinc. This essentially reflects the gradual increase in the proportion of recycled lead and the "end of the strong" in lead consumption. Factors have an adverse effect on lead prices.

Analysis of influencing factors
First of all, the growth of austenitic stainless steel production will support China and the world to maintain a strong demand for nickel resources. Since 1913, austenitic stainless steel has always played the most important role in stainless steel, and its production and consumption accounted for more than 70% of the total output and consumption of stainless steel. According to CRU data, in the next five years, the average quarterly output of austenitic stainless steel will rise from 8 million tons/quarter to 11 million tons/quarter. Among them, China's contribution will exceed 50%.

Secondly, the strong demand for battery materials in the new energy sector will become a new driving force for China's nickel demand. Due to China's strong investment in the field of new energy vehicles, the strong demand for power batteries and ternary materials from new energy sources will become another growth point for China and the world's demand for nickel. In particular, China's leading role in the global new energy vehicles and power batteries, China's demand for nickel in the battery industry will grow faster than the world's average rate.
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. At the same time, with China's economic recovery and China's continuous development and exploration in the field of new materials and new energy, China's demand for nickel will remain strong. . In the next five years, China will lead the demand for nickel metal, which will directly lead to the continued shortage of global nickel metal supply for a period of time in the future.

According to the price-cost percentile analysis method, it is concluded that the 25th quantile line of global nickel mines in 2016 is US$8,600/ton, the 40th quartile price level is US$9,100/ton, and the 60th quartile price level is US$11,100/ton. The quantile price level is US$12,600/ton. According to industry statistics, the global average production cost line of nickel pig iron is USD 13,000/ton.

It can be said that nickel prices have undergone a long period of bottom shocks. Driven by the sound development of the Chinese economy and the long-term "bull market" of China's steel industry, nickel prices have gradually moved out of the bottom shock zone since the second half of 2017. Resume and climb upward. In the next five years, the market for nickel prices will follow the changing curve of the global steel industry and move out of a market that is more compatible with steel. It is therefore predicted that in 2018, nickel prices will fluctuate between the 60-80 quintile line of 11,100-12,600 US dollars/ton.