Non-ferrous metal industry strategy report for the second half of 2019: There are broken and standing

2019H1 review: The deep "supply and demand" difference has led to the divergence of various commodities. More importantly, after the middle of 2018, China's "stable growth" adjustment mode is mainly on the investment side, while midstream manufacturing and downstream consumption continue to weaken, directly impacting most of the non-ferrous metals used in the middle and downstream production and consumption, and the "black strong and weak color" continues to intensify; The differences between non-ferrous commodities come from the impact of policies and the different stages of the cycle of various economies, such as rare earths and gold. The same is true for the secondary market, where changes in macro and liquidity expectations brought about a "watershed in April", and the non-ferrous sector as a whole flattened the market driven by the above two sectors.

2019H2 outlook: It is crucial to define the position of the cycle - the inescapable "Kitchin cycle", which is currently in the "late stage of decline" and "early stage of recovery", the world continues to decline synchronously, and countercyclical adjustment has become a common option and has a tendency to spread further. The momentum of the recovery may lie in the global interest rate cut and easing, and the countercyclical adjustment of various economies has also become a common option, and there is a tendency to further spread - China's stable growth model of "weak stimulus, strong reform, and prevention of hard landing" may continue; The U.S. economy has entered accelerated decline from its peak, and the Fed's interest rate cut expectations by the end of 2019 have climbed from around 20% in April to 90%. In the context of the Kitchin cycle needs to continue to complete the "last hand", the macro and micro planes are broken and established, and the divergence between the colored ones may continue, and the strong will always be strong.

Gold: The "accelerated decline" of the U.S. economic data has opened up the upside of gold during the year, and it is currently in the first stage of the real yield decline, and the gold market may repeat the "cross-year market" again. This round of U.S. real yields fell in Q4 2018, and the rise in gold prices also started here, but gold assets did not actually obtain excess returns between March and June 19, and the U.S. economy officially turned from peak to decline at the end of May and early June, and gold assets were once again concerned by the market; Combined with the judgment of the "late stage of the retreat" and the "early stage of recovery" of the Kitchin cycle, as well as the direction of the U.S. economy, we are currently in the first stage of the downward trend in real yields - mainly driven by the decline in Treasury yields, we continue to be optimistic about the performance of gold in the second half of the year, and repeating the "New Year's Eve market" in 15-16 years is also the meaning of the topic.

Rare earth permanent magnets: the price of medium and heavy rare earths is irreversible, and magnetic materials have opened a new round of business cycle. 1) The importance of rare earths is undoubted, although resources are not unique to China, with China's strong implementation of environmental protection policies and the rectification of the rare earth black industry chain, the transformation from "pure resource output" to "resource input" has been completed, but resources still dominate the world. The closure of Yunnan may lead to a rigid shortage of medium and heavy rare earths (30%), and the price of medium and heavy rare earths will rise in the general trend; 2) Rare earth permanent magnets or will double income, high-end products a new round of business cycle open: on the one hand, the magnetic industry to gross profit margin pricing, will benefit from the rise in rare earth prices to a certain extent, on the other hand, we are more optimistic: with the acceleration of electric vehicles, the proportion of demand for high-performance magnetic materials in the field of new energy vehicles has increased rapidly, and magnetic materials are expected to enter a new round of upward cycle. 3) Further, the strategic value and status of China's advantageous minor metals, such as rare earths, tungsten, antimony, germanium, etc., may be continuously discovered and reevaluated, and we also hope to see better development of China's strategic mineral resources industry.

Aluminum: Ready to go, the starting point of the mid-cycle. The industry reform is still deepening, and the inventory has fallen to below the level of 1.15 million tons; The shortage of aluminum may be a medium-term proposition after 2019, because one of the results of the supply-side reform of electrolytic aluminum is the "red line of electrolytic aluminum production capacity", with an effective output of 39 million to 40 million tons.

(Source: Yangtze River Nonferrous Metals Network)