Resource stock retrading ---- June 2

The imported mining market has risen sharply. Today, the market is running strong, the overall activity of traders has increased, prices are more positive, they are more willing to ship, and speculative demand has recovered.

Overall, iron ore prices are expected to show a price trend of rising and then falling in June.

The support for iron ore prices in the early stages is that demand from steel mills will remain at a high level in the short term, so mineral prices will continue to rebound to a certain extent. Subsequently, with market-based production cuts or the introduction of crude steel equalization policies, the difference between fundamental supply and demand will diverge, and mineral prices are expected to decline under pressure. At that time, the level at the end of the month is likely to be lower than the level at the beginning of the month, and overall ore prices are weakening.

Shanzheng Iron Ore (3047.HK) closed at HK$16.08, up 0.37%

Cumulative Return: 1 Week: 9.02% January: 2.75% March: -10.82% June: 7.27% Launch to Date: 115.84%

The bank notes that management attributed the recent rise in lithium prices to the following factors: 1) gradual improvement in demand; 2) the reluctance of some producers to sell at low prices; and 3) the high price of spodumene concentrate provided solid cost support. Looking ahead, given the traditional seasonal pattern, management is confident about the 33-year demand outlook for the third quarter. Additionally, Ganfeng Lithium has made several investments in Argentina and plans to start production this year to increase its self-sufficiency and overall profit. Management pointed out the differences between Argentina and Chile and believed that the risk of nationalism there was limited. According to the latest market news, Argentina may soon be exempted from the US International Trade Commission. Regarding the Sonora project in Mexico, the worst case scenario is that the schedule is delayed, but Ganfeng Lithium is still confident that it can achieve the production capacity target of 300,000 tons equivalent to lithium carbonate by 2025.

The bank added that Ganfeng Lithium will basically operate at full capacity in the first half of 2023 and adhere to the production guidelines of 110,000 to 120,000 tons equivalent to lithium carbonate in 2023. As of the end of May, its lithium chemicals inventory was 1 to 2 months, below the peak level in early 2023.

According to data from the National Bureau of Statistics, from January to April 2023, the non-ferrous metal smelting and rolling processing industry achieved operating income of 2359.98 billion yuan, an increase of 0.6% over the previous year; operating costs of 224.5 billion yuan, an increase of 3.9%; and total profit of 49.30 billion yuan, a year-on-year decrease of 55.1%.

In January-April, the non-ferrous metals mining and selection industry achieved operating income of 107.97 billion yuan, a year-on-year increase of 1.0%; operating costs of 70.38 billion yuan, a year-on-year decrease of 1.0%; and total profit of 24.83 billion yuan, an increase of 6.7% year-on-year.

China Galaxy Securities said that although the 2023Q1 performance growth rate of the non-ferrous metals industry declined and entered a negative growth range year-on-year, with the domestic economy gradually recovering and the pace of interest rate hikes by overseas Federal Reserve banks slowing down, there are still signs of marginal improvement in industry sentiment. The industry is in the process of bottoming out and gradually reversing its performance. After entering the second quarter, the market is determined to enter the main line and pay more attention to industry sentiment investment. It is expected that the non-ferrous metals sub-industry will continue to experience good investment opportunities in the sector where the boom continues and the boom reverses.