Since the Federal Reserve’s June interest rate meeting, non-ferrous metal prices have fallen 2%-6% more sharply. Overall, global central bank interest rate hikes are expected to trigger recession and demand decline concerns, coupled with supply loosening to slow down the pace of destocking, the center of gravity of non-ferrous metal prices will gradually move down in the second half of the year.
After the Federal Reserve raised interest rates by 75 basis points in June in accordance with market expectations, Powell said a 75 basis point hike would not be a regular operation. But the commitment to restore price stability is “unconditional”, July may still raise interest rates by 50 or 75 basis points. This makes the U.S. retail sales, industrial output, construction permits and new housing starts in May, the number of year-over-year growth is lower than expected and the previous value, the National Association of Home Builders real estate market index in June is lower than expected and the previous value, indicating that the subsequent inflation will eventually gradually fall and accompanied by recessionary expectations are very much in the air.
The ECB is prepared to flexibly use the redemption funds for reinvestment of the maturing portfolio of the emergency anti-epidemic bond purchase program, and plans to design a new instrument to purchase mainly highly indebted government bonds before the July 20-21 ECB Governing Council policy meeting in order to reduce the so-called “fragmentation” risk, i.e., the higher indebtedness The cost of borrowing for countries with higher indebtedness has risen disproportionately relative to other countries. But the main contradiction remains the existence of central banks in other Western countries, represented by the UK and the ECB, which are strengthening their exchange rates by raising interest rates to curb inflationary expectations. The above indicates that the monetary tightening policies of overseas central banks have triggered expectations of economic recession and falling demand, which may put commodity prices such as non-ferrous metals under pressure.
Since 2022, a number of cities in China have adjusted their real estate policies to reduce the down payment ratio, lower mortgage rates and relax CPF loan requirements, plus real estate acquisition loans no longer count as the “three red lines”, making signs of a rebound in commodity housing sales in many large and medium-sized cities in China more and more obvious, but also showing a differential recovery in the first and second lines. However, it also shows the characteristics of differential recovery of first and second line, rather than recovery. According to the 2008-2009 and 2014-2015 major second-tier cities from the policy to the bottom of sales time lag concentrated in 3-6 months, it is expected that in 2022 the national commodity housing sales inflection point may occur in August-October.
In addition, with the introduction of consumer stimulus policies such as auto consumption vouchers in several cities across the country, China’s auto sales in May were 1.862 million units, up 57.6% YoY, and the year-on-year decline narrowed, with new energy vehicle sales of 447,000 units, up 49.6% YoY, and up 105.2% YoY. The above factors make copper, aluminum and zinc processing capacity start rate has recovered, but still less than the same period, indicating that domestic economic growth and consumer demand improvement is expected to be initially realized, but progress is still slow.
From a comprehensive point of view, the copper market, Chile and Peru and copper mining-related strike activities gradually ceased, coupled with China’s copper smelters in the second quarter copper ore stockpile is basically completed, the second half of the domestic electrolytic copper supply will gradually relaxed. Aluminum, the Indonesian government plans to ban the export of bauxite in 2022, but has not been clear date, domestic alumina and electrolytic aluminum new production capacity to accelerate the speed of production and a large volume, so that the domestic electrolytic aluminum supply pressure still exists. Zinc, domestic zinc ore is not a large number of production and grade decline, but production profits are still at a high level, coupled with some zinc smelters have started the third quarter stockpiling, zinc concentrate supply tight and production profits continue to be negative, so that China’s zinc smelters actively or passively reduce production stoppage, resulting in domestic refined zinc supply always exist gap. In terms of nickel, the end of the rainy season in the Philippines has increased the export of nickel ore, and Indonesia has invested or added large ferronickel production capacity, and the production continues to flow back to China, so that China’s ferronickel inventory increases and the supply is loose. Because the cost performance of electrolytic nickel represented by nickel beans is still low, nickel sulfate producers to nickel wet smelting intermediate products as the main raw material, coupled with Indonesia’s high ice nickel exports to China, and the domestic processing of high ice nickel to nickel sulfate supporting capacity is steadily expanding, there is also a loose trend in the supply of domestic nickel sulfate. As a result, electrolytic nickel in stainless steel and ternary battery applications are replaced in large quantities, resulting in the London Metal Exchange electrolytic nickel to depot has slowed down.