Finance and Economics Intelligence App learned that Guosen Securities released a research report stating bullish on metal prices under the stimulus of macro policies. In terms of industrial metals, in late September, under the stimulus of favorable domestic policies, including copper, industrial metal prices experienced a significant rebound. Currently, the spot processing fees for copper concentrates and zinc concentrates are at historically low levels. Approaching the negotiation period for long-term orders among mines and smelters in the fourth quarter of next year, it is expected that there will be more disruptive information on the supply side. Regarding precious metals, the gold price hit record highs, and it is expected that the second interest rate cut by the Federal Reserve is near. In October, the unemployment rate remained unchanged month-on-month, but non-farm data fell far below expectations. As for rare earths, the domestic indicators are slowing down, with the possibility of export disruptions in Myanmar. Recently, the prices of praseodymium and neodymium oxides have been fluctuating in the range of 0.42-0.44 million yuan per ton. If rare earths in Kachin State, Myanmar, cannot be exported, it will have a significant impact on China's rare earth supply.

Guosen Securities' main points are as follows:

Industrial Metals: Trading policy stimulus, prices fluctuate and strengthen.

In late September, under the stimulus of favorable domestic policies, including copper, industrial metal prices experienced a significant rebound. Following the monetary policy, there is anticipation for fiscal policy efforts. During this period, the copper price rose to around 78,000 yuan per ton, with a clear decrease in downstream acceptance. Domestic copper inventories also accumulated, and after a slight copper price decline, the inventories started to decrease again, leading to narrow fluctuations in copper prices. At the end of October, six ministries and commissions issued new regulations on the import of recycled copper and aluminum, with clearer requirements for imported recycled copper and aluminum, which may slightly increase the import volume.

Regarding commodity prices, aluminum prices also fluctuated at a high level in October, with the price center around 20,800 yuan per ton. Aluminum stocks continued to decline in October, coupled with the high prices of alumina, making aluminum prices relatively stronger. Zinc prices in October fluctuated significantly at high levels, mainly due to the continuous backwardation structure of LME zinc, indicating signs of a squeeze. Shanghai zinc significantly rose due to this influence, but as LME zinc unwound its inventory, prices rapidly fell. Currently, the spot processing fees for copper concentrates and zinc concentrates are at historically low levels. Approaching the negotiation period for long-term orders among mines and smelters in the fourth quarter of next year, it is expected that there will be more disruptive information on the supply side.

Precious Metals: Gold prices hit record highs, with the expectation of the second interest rate cut by the Federal Reserve nearing. In October, the unemployment rate remained unchanged month-on-month, but non-farm data fell far below expectations.

In October, the unemployment rate in the USA remained stable at 4.1%, but the non-farm employment increased by only 0.012 million people, far below the market's expected 0.105 million, and significantly lower than the average monthly level of the past year. The significant drop in non-farm data for October is mainly due to the impact of two hurricanes hitting the USA, resulting in a significant impact on the labor market. Additionally, starting from October 1st, new labor contract negotiations broke down due to wage and other issues, leading to a strike by about 0.045 million dockworkers in 36 ports along the East Coast and Gulf Coast of the USA. The strike lasted for 3 days, also negatively impacting employment data. Currently, the "noise" in the non-farm data for October will not change the pace of the Federal Reserve's monetary policy.

Market expects a further 25 basis points rate cut in November. Despite the recent resilience in various economic data in the USA, it will not change the pace of the Federal Reserve's monetary policy for the time being. The market generally expects a 25 basis points rate cut in November by the Federal Reserve. Currently, CME forecasts show the probability of a 25 basis points rate cut in November as 98.4%, and the probability of a 50 basis points rate cut as 1.6%.

Rare Earths: Domestic indicator growth has slowed down, and Burmese exports may be hindered. Recently, the price of PrNd oxide fluctuates in the range of 0.42-0.44 million yuan per ton, and Burma's Kachin State rare earth exports may be affected.

This year, the first and second batches of domestic indicators for mining were released in February and August, totaling 0.27 million tons, a mere 5.9% increase from the 0.255 million tons in 2023. In contrast, the growth rate in 2023 was 21.4%, indicating a significant slowdown in our country's indicator growth rate this year. While domestic rare earth supply growth has slowed down, overseas light rare earth supply has seen a negative growth trend. The USA's Mountain Pass rare earth mine production in 2024H1 was 0.0202 million tons, a 6% decrease year-on-year; Australia's Mount Weld rare earth mine production was 8455 tons in 2024 Q1-Q3, a 32% decrease year-on-year.

As of November 4, 2024, the prices for PrNd oxide, Dy oxide, and T oxide were 0.426 million yuan/ton, 1.69 million yuan/ton, and 5.99 million yuan/ton respectively; China Northern Rare Earth's listed prices for November increased month-on-month, with PrNd oxide listed price at 0.4166 million yuan/ton, and PrNd metal price at 0.516 million yuan/ton. At the end of October, news revealed that the Kachin Independence Army in Myanmar had recently announced control over the country's rare earth mining area. The control by the rebellion may affect the export of rare earth concentrates, and Kachin State is the main rare earth producing area in Myanmar. In the first three quarters of this year, China imported 0.031 million tons of rare earth oxides from Myanmar, accounting for 76% of oxide's total imports and 40% of our country's imported rare earth ore products. If Myanmar's rare earth cannot be exported, it will have a significant impact on China's rare earth supply.

Recommended Portfolio: Zijin Mining Group (601899.SH), CMOC Group Limited (603993.SH), Western Mining (601168.SH), JCHX Mining Management (603979.SH), Tongling Nonferrous Metals Group (000630.SZ), Aluminum Corporation of China (601600.SH), Chinahongqiao (01378), Tianshan Aluminum Group (002532.SZ), Henan Shenhuo Coal & Power (000933.SZ), Yunnan Aluminium (000807.SZ), Chifeng JiLong Gold Mining (600988.SH), Inner Mongolia Xingye Silver&Tin Mining (000426.SZ), China Northern Rare Earth (600111.SH).

Risk Warning: Domestic economic recovery falls short of expectations; Foreign currency policy easing is less than expected; Global resource supply increase exceeds expectations.