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2019 Antaike Nonferrous Metals Conference

2019 Antaike Nonferrous Metals Conference successfully held in Beijing

2019 Antaike Nonferrous Metals Conference opened in Beijing Railway Hotel on March 29. The meeting was organized by Beijing Antaike Information Co., Ltd., and co-hosted by CNMC International Trading Co., Ltd., and supported by China Minmetals Nonferrous Metals Co., Ltd., Chalco International Trading Co., Ltd., China Railway Resources Group Co., Ltd., People’s Government of Bayannur City, Trafigura Investment (China) Co., Ltd., Guojin Metal Information Science & Technology Co., Ltd.. Dozens of media, including Xinhua News Agency, China News Agency, China Securities Journal, China Industry News, China Nonferrous Metals News, China Nonferrous Metals, China Economic Weekly, Commodity Insider, Futures Daily and Shanghai Securities News, participated in and reported the meeting.

The conference attracted more than 500 delegates from national nonferrous metal companies, research institutes, futures and other financial investment institutions. On this nonferrous industry regale, the expert group of Antaike brought the wonderful reports that cover 17 kinds of nonferrous metals for the delegates.

Major contents of the meeting

Macroscopic situation and development trend of nonferrous metal market

Mr. Wang Zhongkui, deputy general manager of Antaike, presented the first report at the meeting. In the report, Mr. Wang simply analyzed the current macro economic and financial situation and the environment for the non-ferrous metals market, and made comprehensive analysis and summary for domestic and international basic metals, precious metals, rare metals supply/demand and the market fundamentals, general outlook for non-ferrous metals market development trend.


Copper: Copper prices are cautiously optimistic driven by tight supply

Mr. Yang Changhua, principal copper analyst of Antaike, shared his views on copper market in the morning session. In 2019, the supply of copper concentrates and scrap copper will tend to be tight. Global net newly-added mining capacity was 250kt. Besides, since the early 2019, the 7# scrap imports have been completely banned, and the 6# scrap will be classified as restricted imports goods from July. China’s environmental policy will also give effects on the recycling quantity of scrap copper. As a result, total supply of domestic scrap copper will continue to decline.


In terms of copper consumption, global economy growth is weak. Copper consumption is still not improving. There is no bright spot in domestic copper demand growth. Power sector is expected to have an improvement. Real estate sector keeps stable. New energy vehicles will be a highlight of the transportation industry, but the base is too small, and the pulling effect on copper consumption is limited. It is estimated that refined copper consumption will increase by about 3.0% in 2019, about one percentage point lower than the previous year.


Aluminum: Very likely to maintain rangebound movement at relatively low level

Entering into 2019, aluminum price continues to fluctuate at a low level, and the focus of the market is still on whether there is enough growth momentum for consumption, which can be said to be "the dawn of a dull market". The global economy drops; it is difficult for the hedging effect of domestic economic stimulus policies to show quickly in a short period; the driving power of major consumer industries such as real estate and automobiles is limited; the impact of international emergencies receded, and thus SHFE/LEM aluminum price ratio returns to the normal range. It is difficult to repeat the sharp growth of aluminum export in 2018. China’s monthly aluminum export has ended the 14 consecutive months of positive year-on-year growth, and there was a declining inflection point in February. It is expected that the full-year 2019 demand growth will further narrow to 1.0 percent.


On the supply side, under the "ceiling" of qualified aluminum smelting capacity, the “capacity expansion" shifts to the "regional transfer". At the same time, some closed capacity are converted into effective capacity, and therefore the domestic supply pressure tends to increase. At present, there are about 40.8 million tonnes per year of qualified aluminum smelting capacity in China and it is anticipated that the capacity will increase by 1.0 million tpy in 2019. Meanwhile, overseas aluminum market still experiences shortage, but the gap is expected to narrow as new capacity is added in 2019.


In terms of production cost, alumina, carbon anode block and other raw and auxiliary materials are in loose supply with low price fluctuations. The trend of fluoride price falling back to a reasonable range is obvious. So, the production cost of primary aluminum is expected to drop further and the support for aluminum price is weakened.


Therefore, Antaike believes that the trend of aluminum price is not optimistic in 2019, and it is expected that the price gravity center at home and abroad will move down in 2019, with the annual fluctuation range of SHFE 3-months aluminum and LMEE 3-months aluminum in 13,200-14,500 yuan/t and USD1,750-2,200/t, respectively.


Lead: Supply is loose, but lead price is hard to decline significantly

After many years’ development, primary lead companies had mature and advanced technology, therefore production stability is mainly influenced by raw materials supply and tight liquidity, rather than environmental protection regulation. Lead and zinc mines have huge gap in ore grade, besides, the existing mines have fewer lead resources, thus capacity increase of lead mines is limited and lead concentrates supply will be in tight balance. However, primary lead enterprises use increasing amount of secondary materials, so secondary lead output rises sharply and demand for lead concentrates shrinks. TCs will grow accordingly, which is good to smelters.


The implementation of “Producer Responsibility Extension System” will boost the rapid development of secondary lead sector. Illegal secondary lead production chain is hit by the reinforced environmental protection regulations. Qualified companies have been in stable profitability since H2 2017, but a part of capacities are still depressed by the insufficient waste battery material and the low utilization rate of homemade technologies. The stable production of secondary lead companies will still be affected by environmental protection regulations.


The consumption of lead-acid batteries is lack of rising momentum because the new national standard for electric bicycles is implemented, towers stop using LAB, and low speed electric cars have restriction in capacity expansion, what’s more, the substitution of lithium battery in power and energy storage fields will be enhanced. Lead consumption will decline steadily from 2019.


To sum up, lead demand growth will be slowdown or in negative, lead smelting capacity will be inevitable in surplus and lead price will decline from 2019. However, price won’t fall too rapidly due to the unstable supply of secondary lead, and it will stay at a relatively high level owe to the rising cost of environmental protection and management. It is estimated LME 3-month lead prices will run at $1,800-$2,200/t and SHFE active contract lead prices at 15,000-19,000 yuan/t in 2019.


Zinc: Price will show an upward-downward trend in 2019

Zinc concentrates supply has improved and TCs hit the nearly highest in recent 10 years. Zinc refineries have much better profit, besides, their production bottlenecks will be weakened in 2019 due to the improved raw materials supply and technological upgrading, thus refined zinc supply will increase especially in H2.


Zinc consumption will be benefited from tax and fee reduction, increasing investment in infrastructure and UHA projects, so consumption will rebound to some extent, but it is just cautiously optimistic.


To sum up, zinc price will decline due to the rising refining capacity, better consumption and narrowing supply and demand gap, but it will be strong during late Q1 and early Q2, and then fell significantly during Q2 and Q3. After that, zinc price will gain some support from stimulus policies and warm market mood.


It is estimated LME 3-month zinc prices will move at $2,200-3,100/t and SHFE active contract zinc prices at 18,000-22,000 yuan/t.


Nickel: Supply gap narrows, prices move down the center of gravity

In 2018 China's primary nickel output was 695kt and the consumption was 1.16Mt, of the total nickel used in battery industry was 53kt while that used in stainless steel industry was 963kt. It is expected that China's primary nickel output will reach 750kt and the consumption will achieve 1.2Mt in 2019. New energy vehicle subsidy policy has de-emphasized the relationship between energy density and subsidy thus high nickel course will depend more on technological maturity and market acceptance, and high nickel course is likely to slow down in short-term.


The hot point of nickel market has transferred from nickel ore export quota of Indonesia, NPI output in China and Indonesia to nickel used in battery industry since 2018, thereby leading to rapid decrease in nickel inventory at home and abroad and a round of spurt in nickel price. The growth of nickel price stimulated continuous release of NPI capacity under construction in Indonesia and the enthusiasm of Chinese enterprises to invest and construct nickel wet process projects in Indonesia.


Owing to nickel output cost advantage in Indonesia, Indonesia is expected to become new energy battery material production center after the shift of global nickel and stainless steel output to Indonesia.


The growth of global stainless steel output slows down, plus usage ratio of domestic waste stainless steel continues to increase, primary nickel consumption in stainless steel increases weakly; power battery is the hope for nickel consumption growth in future, however it is difficult to fundamentally change supply and demand pattern of nickel due to tiny base and big influence of policy. In 2019 nickel price will still move down the center of gravity and the annual fluctuation range will operate between US$ 10,000/t and US$ 15,000/t.


Cobalt: Supply remaining sufficient, prices giving back some of their gains

Cobalt prices gave back some of their gains since April in this year. At present, Europe’s cobalt metal prices fell to a range of USD13.3-14/Lb, with a drop of 69%. Domestic cobalt metal prices dived to 260,000 yuan/t from a higher level of 690,000 yuan/t, with a total decrease of 62%. Suppliers’ continual expanding production, represented by Glencores, China Moly, Shalina and RTR, resulted in a surge in cobalt supply, adding Sino-US trade war deteriorate business and investor confidence, which made traders and institutional investors profit taking.


In 2018, cobalt concentrates production was 82,000t in China, while cobalt consumption was 65,000t. Demand from industries such as new energy vehicles is growing fast, but has a small share. With consideration of the energy density never emphasized in the new subsidy policies, we think the high-nickel battery tendency will slow down, or some A00 vehicle manufacturers may turn to lithium iron phosphate battery, therefore the effect on cobalt was neutral.


Cobalt prices stay at historically lower levels, and DRC’s new mining act pushed up cobalt cost. It is expected that with demand recovery in April and May, cobalt prices are likely to rebound but limit in a lower range of USD12-26/Lb because sufficient supply would restrain price from soaring.


Silver: Range bound pattern with a higher bottom

Domestic silver outputs reached 19,481t, up 6% y-o-y in 2018, with higher industry concentration. The annual output of three major producers each surpassed thousand-ton level. Foreign trade dependence of production was 43%. The consumptions reached 6,544t with a loss of 2% on a yearly basis, dragged by shrinking demand from jewelry and photovoltaic sectors. The annual stocks of this year maintained at a high level.


Dragged by the shrinking outputs from mine production and secondary production, the global supply of physical silver reached 29,207t in 2018, down 5.7% y-o-y. According to Antaike’s adjustment, the global consumptions reached 30,700t with a loss of 3% on a yearly basis, and the demand from silver coin and medal dropped by 13.4% y-o-y. Compared with the high of 2015, physical demand dropped by 14%, while demand from silver coin and medal dropped by 61%. COMEX’s stocks hit a new record, and sliver ETPs witnessed a net outflow of 651t.


The global physical supply is expected to reach 30,482t in 2019, up 4% y-o-y, while the physical demand is expected to reach 32,278t, up 5% y-o-y. The demand from jewelry and silverware, coin and medal will witness a significant increase. In 2019 domestic sliver outputs are expected to reach 20,500t, up 5% y-o-y, while consumptions are expected to reach 6,748t, up 3% y-o-y.


Driven by the shift of monetary policy, gold price recovered in Q1. On March 22nd US Treasuries yield differentials between long term and short term was negative for the first time for twelve years, which was usually considered to be the harbinger of recession. According to officials from US Federal Reserves, the economy growth is only 1.9% in 2020. Geopolitical uncertainty and Brexit evoked gold market sentiments. But once the global economy eventually declines, investors will prefer to hold long-term treasuries. Gold price will be lack of core power without inflation. Following the price trend of gold, silver price rebounded. But the weak fundamentals and huge above-ground stocks will continue to drag silver price to move forward. Silver price is expected to maintain the range bound pattern with a higher bottom and to average at US$16.3/oz in 2019.


Gold: Macroeconomic risks evoke market sentiments of gold

In 2019 the uncertainties of global trade policies and geopolitical tensions (nuclear issues of Iran, Korean Peninsula) will continuously hurt economy growth and make it slowdown. Besides, global monetary policies tend to normalize (US Federal Reserves will suspend its rate hike and ECB will start rate hike), and the bearish sign appeared in US stock market under the background of weak US dollar. Driven by development of new energy technologies and production cuts of OPEC, international crude oil price is expected to be held at the previous level in a dilemma. As a result, all the risk factors in the fields of international politics, geopolitics, finance and society will continuously expand the volatility and rebound scale of international gold price. In the future international gold price is expected to maintain the shock and upward pattern with a higher bottom line. Without unexpected events, gold price is expected to fluctuate between US$ 1,260/oz and US$ 1,400/oz and average at around US$1,330/oz in 2019.


As to overall industry development, the total supply and demand basically remained stable in global gold market over the past decade. But in 2018 gold procurements by central banks throughout the word created a new high over the past five decades. China’s gold outputs have ranked the first in the world for the consecutive 12 years, and its consumptions have also ranked the first for the consecutive 6 years. In the current 10 years, the short-term supply gap of gold tended to expand in China.


At present the investment chance of gold for asset allocations is apparent. There is plenty growth space both for combination of gold production and finance, and for Internet financial innovation in China. At the same time, in China copper and gold have been the two major mineral categories for overseas mining exploration and investment. With China’s implement of national strategy “One Belt and One Road” and current mergers or acquisitions of international gold mining enterprises, the global industry pattern will significantly change in gold sector, which will bring new opportunities for China to invest in overseas gold mining sector.


Tin: Global supply shortages narrow, prices are under pressure

After experiencing a shortage of ore, demand and economic slowdown in 2018, tin prices rose slightly in shocks. The global market continued a small shortage, and the domestic market was surplus, but the shortage and excess were narrowed. The global shortage has been reduced to 3,000 tons, and the domestic surplus has been reduced to around 2,500 tons. This is mainly due to the elimination of China's refined tin export tariffs and the improvement of export tax rebate rate in some tin products and other favorable policies, which promoted exports.


In 2019, China, as the world's largest tin market, the decline in the amount of imported ore in the future, the tightening of safety and environmental protection policies and the changes in domestic tin export policies are still the focus. It is estimated that the average price of spot tin will reach 148,000 yuan/ton in 2019, and the average price of LME 3-month tin will reach USD20,300 /ton.


Rare earths: The overall rangebound trend with differentiation in price movement of heavy and light rare earths

In recent years, with the establishment of a diversified global supply pattern of rare earths, the supply of rare earths has been increasing year by year, with about 190,000 tonnes in 2018. Among them, China, the United States, Australia and Burma account for about 95% of the global supply of the mineral products. Due to a lack of smelting and separation capacity at abroad, large amount of light rare earth minerals and rare earth primary products have entered the Chinese market. In 2018, China imported nearly 30,000 tonnes of rare earth concentrates and 58,000 tonnes of rare earth compounds, up by 95 percent year-on-year, making China the largest importer of rare earth products in in the world in 2018.


On the other hand, affected by the trade war between China and the United States, the growth of demand for downstream products slows down, which leads to a downward trend of rare earths prices in 2018.


In 2019, the market worry is intensified due to uncertain in supply prospect of Burma's ion-type rare earth ores,. The prices of medium and heavy rare earths rise, while the prices of light rare earths continue to decline, so the price trend of light and light rare earths diverges.


Prices will rise further if imports from Burma are halted and ion-type mines in the country are not restarted.


Lithium: The long-term positive trend doesn’t change, price downs to the reasonable level

Affected by factors such as industrial policies, supply & demand and market conditions, lithium price shrank significantly in 2018. Since mid-2018 lithium carbonate price slumped rapidly. By the end of December, lithium carbonate price for battery use dropped from RMB 160,000/t earlier this year to RMB 79,500/t, down 52.4%; lithium carbonate price for other industrial use dropped from RMB 150,000/t earlier this year to RMB 72,500/t, down 53.5%.


In 2018 spodumene ores from Australia are the main force of global lithium resources, while China’s supply of lithium salts increased. In 2019 global lithium outputs will increase further and market will experience periodic supply surplus. In the year of 2018, China’s supply of lithium salts reached 160,000t; consumptions reached 143,000t; net exports reached 10,200t; supply surplus reached 8,500t. From the beginning of 2019, anode and battery producers experienced excess-stocks. With the rapid progress of global lithium development projects and production cuts of lithium iron phosphate restrained by policies, at present lithium salts supply has witnessed periodic surplus in short term.  


With continuity of preferential policies, demands of lithium battery will increase rapidly. As its resource attribute, the development of lithium carbonate industry will soon enter the upward channel. Domestic lithium consumptions are expected to reach 164,900t in 2019 and 189,600t in 2020, with the annual growth rate of 15%.


According to our estimation, lithium price will return to rationality in the future. Price will struggle under the dilemma of strong mine supply and downstream buyers’ cost control. The sharp rises and falls of price are not expected to appear in 2019, and price is expected to average between RMB 75,000 yuan/t and RMB 80,000 yuan/t. Global supply & demand of lithium salts will reach a new balance before 2020, and lithium salts price will have rational return at RMB 90,000 yuan/t with a positive trend.


Indium: Production and consumption are booming, but prices are suppressed by stocks

In 2018, domestic refined indium increased in production and consumption. Huge inventory inhibits market enthusiasm. Investment demand has cooled. For the supply side, the supply and production of indium raw materials are in a centralized state. Under the background of national environmental protection, it is difficult to increase substantially. For the demand side, China's manufacturing technology for indium target materials has gradually entered the harvest period, and mass production has been continuously improved, driving the direct consumption of domestic refined indium to increase year by year. From 2019 to 2020, refined indium consumption will continue to grow steadily. Affected by environmental protection and low market prices, production will be in a state of volatility. Changes in supply will drive a slow improvement in supply and demand, but the market will still face pressures and challenges from historical inventory. Indium prices are unlikely to have a breakthrough performance.


Bismuth: Supply surplus is reduced, but weak demand still suppresses prices

Under the multiple pressures of sluggish demand, market vitality affected by long-term contract, and production growth, bismuth market has been in the lowest state in recent years. Although prices will further dampen the enthusiasm of major companies, as a by-product of lead and copper, with the improvement of raw material supply, primary copper and lead enterprises are expected to increase their production by 2019-2020. In the context of the domestic economic downturn and the high global economic uncertainty, it is difficult for consumption growth rate to increase. From 2019 to 2020, the domestic oversupply is expected to shrink, but it still exerts great pressure on the price.


Germanium: Supply and demand are in good condition

In the context of the commissioning of global optical fiber preform capacity, germanium market has maintained rapid growth in consumption for two consecutive years and is fully reflected in the trend of germanium prices. Due to the increase in global zinc concentrate production, the by-product germanium increased. In 2019, the production capacity will continue to be further released, and the oversupply will continue. However, for the limited resources, the surplus is still within a reasonable range. With the extension and transfer of the value of the gemium industry to the middle and lower reaches, the gemium industry in China is constantly improving, and the proportion of high-end products is increasing. The value prospect of gemium is still immeasurable.


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