CITIC Securities: Liquidity shock amplifies short-term volatility, upward trend in precious metals remains unchanged, limited downside space for base metals

According to the Wise Finance APP, Zhongtai Securities released a research report stating that this week, the market's expectation for a rate cut in the US in September continued to rise. However, under the temporary liquidity shock, the volatility of precious metal prices increased. The central bank suspended gold purchases for three consecutive months this week, but the impact on gold prices has weakened. In the medium to long term, the actual yield of US long-term treasury bonds is still around 2%, a historical high. With low economic risks in the US under high interest rates, along with the reshaping of the global credit landscape, precious metal prices are expected to maintain a long-term upward trend. Similarly, in the context of the reshaping of the long-term supply and demand landscape, the downward space for basic metal prices is limited, and the industry is expected to maintain long-term high prosperity, especially for copper and aluminum.

Market Review: Bulk metals fluctuated: 1) During the week of August 5th to 11th, LME copper, aluminum, lead, zinc, tin, and nickel had weekly price changes of -2.8%, 1.4%, 0.2%, 2.9%, 2.9%, -0.3% respectively. SHFE copper, aluminum, lead, zinc, tin, and nickel had price changes of -2.8%, -0.5%, -1.4%, -1.4%, 2.9%, -0.1% respectively; 2) COMEX gold closed at $2473.40 per ounce, up 0.15% compared to the previous period, while SHFE gold closed at 560.70 yuan per gram, down 2.32% compared to the previous period; 3) The non-ferrous industry index underperformed the market this week, with the Shenzhen non-ferrous metals index closing at 3,944.74 points, down 2.85% compared to the previous period, lagging behind the Shanghai Composite Index by 1.37 percentage points. The price changes for minor metals, new metal materials, industrial metals, energy metals, and precious metals were -1.72%, -2.18%, -2.36%, -2.75%, -6.39% respectively.

Macro "Three Factors" Summary: Domestic recovery momentum needs to be enhanced, US rate cut cycle about to begin. Specifically:

1. Domestic recovery momentum still needs to be enhanced: July CPI year-on-year at 0.5% (previous value 0.2%, expected 0.31%); July PPI year-on-year at -0.8% (previous value -0.8%, expected -0.8%); July export amount year-on-year at 7.0% (previous value 8.6%, expected 9.6%), import amount year-on-year at 7.2% (previous value -2.3%, expected 3.24%).

2. US July ISM non-manufacturing PMI unexpectedly rebounded: US July ISM non-manufacturing PMI at 51.4 (previous value 48.8, expected 51.0); July Markit services PMI at 55.0 (previous value 55.3, expected 56.0).

3. Eurozone July services PMI declined: Eurozone July services PMI at 51.9 (previous value 52.8, expected 51.9); June Eurozone PPI year-on-year at -3.2% (previous value -4.1%, expected -3.3%), month-on-month at 0.5% (previous value -0.2%, expected 0.1%).

4. Global manufacturing in July below the boom-bust line: Global manufacturing PMI in July at 49.7, down 1.1 compared to the previous period, below the boom-bust line.

Precious Metals: Rate cut expectations rise, liquidity shock amplifies short-term volatility

During the week, the 10-year US Treasury bond's real yield was 1.84%, up 0.08 percentage points compared to the previous period, with a residual of $1596.4 per ounce calculated by the real yield model, up $11.1 per ounce compared to the previous period; The probability of two interest rate cuts in September increased from 22% to 49% within the week. Currently, the actual yield of the U.S. 10-year Treasury bond is at a historical high of around 2%. Under high interest rates, the risk of the U.S. economy exceeding expectations is low. In the context of deglobalization, the reshaping of the global credit landscape will support gold prices to reach new highs.

Bulk Metals: Liquidity shocks combined with recession concerns, prices fluctuate

During the week, with liquidity shocks and global economic recession concerns, the prices of base metals fluctuated, but the overall destocking trend is expected to provide support for sector prices. It is anticipated that there is limited downside space for prices to further decline.

1. For electrolytic aluminum, inventory continues to decline, aluminum prices may stabilize with fluctuations

On the supply side, the operating capacity of the electrolytic aluminum industry remained stable this week, with no plans for production cuts, resumptions, or new investments in the industry in the short term. The operating capacity of the Chinese electrolytic aluminum industry remains at a historical high of 43.426 million tons. In terms of demand, as August approaches the traditional peak season of "Golden September and Silver October," coupled with the recent significant decline in aluminum prices, downstream demand has slightly improved. In terms of inventory, domestic aluminum ingot inventory is 890,000 tons, a decrease of 10,000 tons compared to the previous period, and domestic aluminum rod inventory is 228,400 tons, a decrease of 17,900 tons compared to the previous period.

1. The price of alumina is 3,911 yuan/ton, an increase of 2 yuan/ton from the previous week. The cost of alumina is 3,067 yuan/ton, a month-on-month increase of 0.02%, with a gross profit of 844 yuan/ton, a month-on-month increase of 0.3%.

2. Regarding prebaked anodes, the average price this week is 4,373 yuan/ton, unchanged from the previous period. Considering the impact of one month of raw material inventory, the average cost this week is 4,488 yuan/ton, with an average gross profit of -115 yuan/ton, a decrease of 8.52% from the previous period. Without considering raw material inventory, the average cost of prebaked anodes this week is 4,407 yuan/ton, an increase of 0.15% from the previous period, with an average gross profit of 35 yuan/ton.

3. For electrolytic aluminum enterprises with 100% self-supplied thermal power plants except in Xinjiang, the immediate cost is 17,446 yuan/ton, a decrease of 0.16% from the previous period. The spot price of aluminum in the Yangtze River is 19,020 yuan/ton, an increase of 0.26% from the previous period, with a profit of 1,044 yuan/ton, an increase of 5.23% from the previous period.

Fundamentally, the subsequent domestic electrolytic aluminum operating capacity is gradually stabilizing, and the supply side is gradually peaking. Downstream aluminum production has slightly improved, with a convergence of long and short positions in the short-term macro fundamentals. Aluminum prices are expected to remain in a sideways fluctuation pattern, with the cost side of electrolytic aluminum still playing a supportive role.

2. For electrolytic copper, the off-season effect continues, copper prices stabilize with fluctuations

On the supply side, on August 9th, the SMM imported copper concentrate index (weekly) was reported at $6.12/ton, a decrease of $0.43/ton from the previous period of $6.55/ton. In terms of demand, the current market demand is in the process of slow recovery, with signs of gradual increase in orders in most industries. With the recent decline in copper prices, end customers are more inclined to purchase on dips, and the number of observers has decreased compared to before. In terms of inventory, as of August 9th, overseas LME copper inventory is 296,400 tons, an increase of 49,900 tons compared to the previous period, an increase of 215,400 tons compared to the same period last year. COMEX inventory increased by 6,700 tons from the previous week to 22,500 tons, a decrease of 21,200 tons compared to the same period last year. Domestic inventory stands at 426,000 tons, a decrease of 18,900 tons compared to the previous period, an increase of 107,800 tons compared to the same period last year. The global total inventory is 694,100 tons, an increase of 37,700 tons compared to the previous period Fundamentally, although domestic social inventories have decreased, LME copper inventories have increased significantly, and global visible inventories remain high. After the market declined, domestic copper prices fell, and terminal orders partially released, leading to a slight recovery in consumption. Overall, in the short term, copper prices will continue to adjust under the influence of inventory pressure and macro pressures.

3. For zinc, inventory rapidly falling provides support to prices

On the supply side, Baichuan statistics show that domestic zinc ingot weekly production was 100,200 tons, a decrease of 0.59% compared to the previous period. On the demand side, downstream buyers in China are purchasing on dips, but demand is affected by high temperatures and heavy rainfall, leading to weak demand that is difficult to change. The market overall presents a weak pattern of declining supply and demand. In terms of inventory, zinc ingot inventories in seven locations total 139,200 tons, with a decrease of 12,300 tons.

4. For steel, weak demand remains the main contradiction in market development

On the supply side, influenced by the sentiment of new and old rebar conversion, with a focus on consuming old national standards, many steel mills are controlling production and sales. Rebar production has decreased significantly, and the continued contraction of steel mill profits has led to a reduction in steel production. On the demand side, according to a century-old construction survey, as of July 30th, the capital in place rate of sample construction sites was 62.05%, a decrease of 0.30 percentage points compared to the previous week. Sample construction site funding has decreased, and downstream payment periods are also lengthening. The future is still in a weak demand season, and steel demand remains soft. In terms of inventory, with a significant reduction in steel supply and seasonal demand decline, it is expected that inventory will slightly decrease in the future. Overall, there are currently no significant favorable macro policies, coupled with the accumulation of fundamental contradictions in the steel market. Short-term steel prices are expected to remain under pressure.

Risk Warning: Risks include macro fluctuations, policy changes, unexpected assumptions in calculations, metal price volatility, risks of unexpected industry policies, risks of lower-than-expected downstream consumption, and risks of using outdated or untimely information in research reports, etc