The Zhitong Finance App learned that Guolian Securities released a research report saying that profits on the copper mine side rebounded as prices rose, and processing fees on the smelting side declined. The overall profit of the copper sector is expected to rise throughout '23 and Q4. In addition, 23Q4 aluminum prices all increased year on month, and weakening the cost side is expected to bring about a significant improvement in aluminum companies' profits. The bank believes that many factors suppressing metal prices in 2024 are expected to ease, and that the pace of global economic recovery in the post-pandemic era may become the core of non-ferrous metal pricing. As the Fed's interest rate hike comes to an end, the US dollar index falls significantly, and global liquidity is expected to improve, compounded by expectations of China's economic recovery, they continue to be optimistic about investment opportunities in the non-colored sector and maintain a “better than the big market” rating.
The views of Guolian Securities are as follows:
Industrial metals: Q4 earnings are expected to improve, and the copper and aluminum sector is performing or better
Copper: The average price of Shanghai copper in 23Q4 was 67,700 yuan/ton, up 4.35% year on year and down 1.42% month on month; the average price for 23 was 68,000 yuan/ton, up 1.72% year on year. Mining side profits rebounded as prices rose, and smelting side processing fees declined. The overall profit of the Q4 sector is expected to rebound throughout '23 and Q4. Looking ahead, the bank believes that in 2024, the central banks of overseas economies represented by the Federal Reserve will restart interest rate cuts to boost the economy, and the suppression of copper prices will gradually weaken. Low inventories will give copper prices more upward flexibility and room.
Aluminum: The average price of aluminum in 23Q4 was 18,900 yuan/ton, up 1.29% year on year; up 1.48% month on month; the average price of aluminum in 2023 was 18,600 yuan/ton, down 6.47% year on year. 23Q4 aluminum prices all increased month-on-month, and the weakening cost side is expected to bring about a significant improvement in aluminum companies' profits. Prices of Q4 pre-baked anodes continued to decline due to falling prices of upstream raw materials, petroleum coke and coal asphalt, and electricity prices weakened as thermal coal prices declined; prices of Q4 alumina rose slightly in anticipation of disturbing supply-side expectations.
Energy metals: profits of lithium companies are under pressure, and cobalt prices operate weakly
Lithium: Due to downstream demand gradually entering the off-season, supply-side volumes continued, and the decline in mine-side costs brought about by changes in pricing methods, 23Q4 lithium prices declined significantly. The average price of Q4 battery grade/industrial grade lithium carbonate was 1,486/136,900 yuan/ton respectively, down 73.04%/73.95% year on year and 38.72%/40.40% month on month; the decline in lithium prices put pressure on the profits of lithium carbonate manufacturers.
Cobalt: Demand for consumer electronics on the demand side is weak, supply-side production is still growing, and cobalt prices continue to operate weakly. According to the Luoyang Molybdenum Industry announcement, 23Q4 achieved cobalt production of 183,000 tons, an increase of 264.68% over the previous year and an increase of 2.39% over the previous year; it achieved 55,500 tons of cobalt production for the full year of 2023, an increase of 173.72% over the previous year. The bank believes that although cobalt prices continue to operate weakly, based on the logic that production growth can dilute fixed costs and drive the scale effect; volume increases may partially offset the impact of falling prices on profit levels.
Rare earths: Q4 prices declined year on year, and light and heavy rare earths were differentiated
Rare earths: The 23Q4 rare earth market ushered in the traditional low season. Downstream stocks were not very active, prices fluctuated downward, and light and heavy rare earths were slightly divided. In terms of light rare earths, the average price of 23Q4 praseodymium oxide/praseodymium mixed metals was 49.21/604,500 yuan/ton, respectively, down 26.82%/25.83% year on year and 1.30%/1.61% month on month. On the heavy rare earth side, the price was supported by a relative shortage of heavy rare earths on the supply side. Taking terbium oxide and dysprosium oxide as examples, the average price of Q4 terbium oxide/dyssium oxide was 800/2.65 million yuan/ton, respectively, which was -40.02%/+12.88% year-on-year; 3.22%/10.98% increase month-on-month.
Risk warning: metal demand falls short of expectations; risk of continued monetary policy contraction; supply chain risk; risk of performance forecasting bias.