全球-金属与采矿业-金属季报：应谨慎对待Q2金属估值拉伸但Q3全球经济增长将重新上行.docx

Global Commodities Research11 March 2019Global Commodities ResearchNatasha Kaneva (1-212) 834-3175 natasha.kanevajpmorgan JPMorgan Chase Bank NAGregory C. Shearer (44-20) 7134-8161 gregory.c.shearerjpmorgan J.P. Morgan Securities plcGlobal FX Strategy Thomas Anthonj AC (44-20) 7742-7850 thomas.e.anthonjjpmorgan J.P. Morgan Securities plc Ladislav Jankovic AC (1-212) 834-9618 ladislav.jankovicjpmchase J.P. Morgan Securities LLCGlobal Quantitative and Derivatives StrategyThomas J Murphy, PhD AC (1-212) 270-7377thomas.x.murphyjpmchase J.P. Morgan Securities LLCJ. P MorganCorrected Note (See paqe 51 for details)Metals QuarterlyStretched valuations warrant caution on metals into 2Q but firmer global growth should reopen upside in 3QHaving risen 11% year-to-date, industrial metals have shrugged off weakness in the global growth cycle (including a new low for manufacturing PMIs) and instead are already pricing in a full rebound in macro data. More specifically, at current spot levels, metals are trading at a 20% premium to the current global PMI of 50.6. Put differently, metals are already anticipating a rebound in the global manufacturing PMI to close to 53一a high hurdle. While we hold the view that global growth will stabilize and lift by midyear, we believe the base metals markets are now already pre-emptively pricing in the best possible outcome. In base metals, stretched valuations at present keep us bearish vs spot levels into 2Q19 but a stabilized global and Chinese economy later in the year reopens upside for metals in 3Q18. We still see dark macro clouds on the 2020 horizon, however, and continue to call for industrial-linked metals to sell off hard into year-end. If we are correct and accommodative monetary policy and looser financial conditions manage to stabilize and then lift global growth by early-2Q, we expect bond yields to move decisively higher. The potential for higher US yields and their pass-through impact on the dollar (which tends to inflect higher when the bond market starts to anticipate further Fed hikes), could likely weigh on precious metals in the coining months. Our forecast calls for lower spot prices in 2Q. However, we maintain our longer-term 2H19 bullish outlook and continue to favor precious metals on their unique late-cycle characteristics. In terms of our price forecasts, in base metals our 2019 price upgrades range between 4% in nickel to 2% in copper and zinc. Aluminum, the only metal that didn't reach our price target in IQ, stands out as the single downgrade (-3%). We leave our 2020 price forecast unchanged. In precious metals, at this juncture, we opt not to make any major changes to the price trajectory for gold, silver and platinum, continuing to see 2H19 upside. In palladium, we now see some more intra-quarter volatility over 2Q19 and 3Q19 but retain a view that prices will ultimately retrace into year-end.See page 51 for analyst certification and important disclosures. jpmorganmarkets Copper supply and demand balance, thousand metric tonnes201420152016201720182019E2020F2021F 2022F2023FMine Production18,65119,22520,18020,06520,604growth2.4%3.1%5.0%-0.6%2.7%Refined Production21,81822,16722,73722,95023,564growth5.5%1.6%2.6%0.9%2.7%Refined Use21,54821,76722,33222,90023,646growth3.8%1.0%2.6%2.5%3.3%Balance27040040551-82Source: Company reports, Government and Industry data, USGS, Antaike, CRU, Wood Mackenzie, J.P. Morgan Commodities ResearchCopper balance by region, thousand metric tonnesGlobal Balance201420152016201720182019E2020F2021F 2022F2023FMine Production201420152016201720182019E2020F2021F2022F2023FAsia2,7982,8943,2283,2713,4893,2703,4963,9404,2594,268China1,7141,5361,6901,8081,9061,9682,0102,0402,0682,076North America2,6122,7342,8832,6682,5452,8162,8762,8892,9382,803Central & South America7,5578,0038,3458,3488,6189,2599,4409,6849,98910,151Europe1,0201,0431,0761,1031,0891,0621,0721,0331,005969Eurasia1,3621,3361,3591,4311,5461,7351,7661,7921,8371,848Middle East254280328341381374408435448449Africa2,0831,9831,9892,0582,3242,5752,9393,0483,3393,379Oceania9659529748468749881,005950921783Mine Production18,65119,22520,18020,06520,86522,07923,00223,77224,73624,649Refined Use201420152016201720182019E2020F2021F2022F2023FAsia13,52813,98814,58415,25515,80916,28316,62616,95817,24117,522China9,78810,16210,62011,15311,71112,02712,31212,46712,62212,767North America2,2082,1832,2242,1962,2552,2962,1962,3602,3882,416Central & South America582537470432441458443491507524Europe3,5963,6473,6683,6323,7213,7333,6393,8553,9043,949Eurasia622447418412424429427438441444Middle East734706757768788803790844864884Africa255244193185189195188208214221Oceania22141819191918191919Refined Use21,54821,76722,90023,64622,33224,21524,32725,17425,57725,979Source: Company reports, Government and Industry data, USGS, Antaike, CRU, Wood Mackenzie, J.P. Morgan Commodities ResearchRefined ProductionRefined Use21,81822,16722,73722,95023,56424,07324,71225,30625,64125,91821,54821,76722,33222,90023,64624,21524,32725,17425,57725,979Balance27040040551-82-14238513264-61Alternative scenarios to copper base-case viewRisk biasScenariosForecast range under risk scenario |Bearish:a) Chinese demand slows markedly on the back of economic$4,887/t for 2019Bullishmoderation and less metals intensive growth; b) Global economic growth momentum is not maintained and begins to underperform expectations; c) mining disruptions come in less- than-expected in 2019 adding to already strong mine production growth; d) Fed turns more hawkish and dollar strengthens; e) oil declines rapidly from current $65/bbl level.Bullish:a) Strong Chinese demand is maintained through 2019 with metals intensity surprising to the upside; b) global economic growth outperforms expectations, providing an even more supportive environment for commodities; c) mine disruptions in Africa escalate further in 2019; d) US$ weakens meaningfully.$7,330/t for 2019Source: J.P. Morgan Commodities ResearchAluminum-lower Chinese production growth to keep market in deficit The most constructive development of last year continues into 2019 as the massive downgrade of Chinese primary aluminum production persists. Capacity growth ex-China has also underperformed our expectations. Since last November we have removed 1.1 mmt of global aluminum supply in 2019. Chinese demand will likely grow at 5.3% in 2019, driven by stimulus policies and export markets. Chinese exports should crowd out primary demand ex-China. In 2019 we expect a global deficit of 1.7 mmt as production growth slows further and demand recovers later in the year.Since November we have downgraded China's aluminum production by close to 1 mmtThe most constructive development last year was the massive downgrade of Chinese primary aluminum production. In our 2018 Annual Outlook we forecasted Chinese production would average 37.67 mmt in 2018, however the actual figure realized 1.43 mmt lower. At 36.24 mmt, this was the first annual decline in China's aluminum supply since 2009. The majority of production was closed because of a significant compression in profit margins given falling aluminum prices and rapidly rising costs. Correspondingly, alumina was mainly blamed for the negative impact on earnings during the 2Q and 3Q reporting seasons.Margins have continued to weaken despite the recent slump in alumina price一the benchmark Australia alumina price has dropped almost 45% from its April high of $707/t to $390/t today. The Chinese alumina price is holding better, down only 16% from its peak in mid-September. Our margin tracking model suggests Chinese smelter cash profit margins now stand at around RMB 1,900/t, which is a much healthier level compared to last November but still meaningfully lower than the RMB 3,000/t profit averaged in 2015 when Chinese smelters closed 2.4 mmt/a of operating capacity (Exhibit 1). As a result, price-driven closures continue and now amount to 3.4 mmt/a since IQ18 (Exhibit 2).We now forecast China's aluminum production to reach 36.9 mmt in 20191.9% yoy growth vs. last yearandalmost one million tonnes lower than the 37.88 mmt we forecasted last November. It is notable, that out of the 13 smelters that are ramping up capacity this year, nine are SOEs and 12 are currently losing money.Exhibit 1: China aluminum smelters5 cash operating profitRMB/t5,000 -4,000 -3,0002,000000。n 8vn 87da - 8VUC - 5S zvm '匚第 '匚专 '9 二3。 - 9工n '9L第 9VUC Lol Lnvm LowdvSource: Antaike, Metal Bulletin, China Coal Resources, J.P. Morgan Commodities ResearchExhibit 2: Global closures of smelting capacityThousand mtCapacity growth outside of China has also underperformed our expectationsWe further downgrade our expectations for 2019 exChina aluminum production by almost 0.2 mmt9 seeing 29.09 mmt now vs. 29.26 mmt last November. Five smelters are responsible for the majority of slippage.The return of Albras, Belem smelter to full capacity still remains uncertain, pending the developments at the Alunorte refinery. There is a heightened environmental awareness in Brazil following Vale's iron ore tailings dam breach, which has extended the apprehension overc:工 8VS-S 8V亶 8VU2 zv&s =富 二专 9VS-S 9L富 97UC gvs-s 巴看三 gvue 寸vdCDs 寸工量 W，UEgranting operating permits to other mining sectors. We now expect Alunorte to return to full production in 4Q19, and Albras to follow in 1Q2020.In Canada, despite the news that ABI had offered its employees a contract to end the 14-month lockout of the 450 kmt/a Becancour smelter, we don't expect the smelter to restart until 4Q19 now.In the US, Century announced that the restart of Hawesville plant is on schedule and two of three idled potlines have reopened so far with the third line slated to restart in IQ19. However, the company announced that it will take down one of the potlines for maintenance, keeping it idled until 2020. As a result, we have lowered our production estimate for the plant by 5() kmt.In Venezuela, dire economic conditions are having a toll on aluminum production. The two existing smelters in the country are producing 2 kmt of aluminum ingot per month combined and we expect total production to amount to only 16 kmt in 2019, down from 136 kmt in 2017.Partially offsetting production slippage elsewhere, the second phase of RusaPs Boguchansky smelter is occurring ahead of our expectations, prompting us to lift our production by around 100 kmt in 2019 and 150 kmt in both 2020 and 2021.We now see global aluminum supply growing at 3.3% yoy to 66.0 mmt in 2019 following on a 0.7% rise in 2018. In a highly unusual development, this growth will be driven by capacity additions outside of China (Exhibit 3).Exhibit 3: China and ex-China aluminum supply growthPercentSource: Company reports, CRU, J.P. Morgan Commodities ResearchChinese demand to grow at 5.3% yoy, driven by stimulus and export marketsThe state of Chinese demand remains the main focus as the slowdown in China's construction sector andweakening automotive output continues to weigh on Chinese aluminum consumption.The decrease in domestic demand was also reflected in the record exports of unwrought aluminum and aluminum products last year, which reached a record 5.8 mmt in 2018. Despite US trade actions, Chinese exports surged 25% yoy to compensate for slow domestic demand growth. This trend has continued into this year (Exhibit 4).Exhibit 4: China's exports of unwrought aluminum and aluminum productsThousand mt600500 -400300200100 -Source: China CustomsAt present, we forecast Chinese primary aluminum consumption will likely grow by 5.3% in 2019, up from 4% growth last year, supported by more aggressive stimulus policies. The strength of domestic demand remains the main question, as aluminum product exports accounted for almost 70% of China's primary demand growth last year. CRU estimates that if China was dependent exclusively on its domestic demand in 2018, growth would have fallen to 1.3% yoy.As China's economy shifts further away from investment, we believe that semis exports will increasingly become an integral part of the domestic demand mix. Based on our view that semis exports will continue to rise over the next few years as a means to sustain China's aluminum demand growth, we see exChina demand growth downshifting over that period and expect only 0.7% growth this year.1.7 mmt global deficit in 2019; Ex-china shortage cushioned by Chinese product exportsIn 2019 we expect a global deficit of 1.7 mmt, close to 2018's deficit, as production growth slows further and demand recovers later in the year. The deficit by itself should fundamentally justify higher prices going forward but, similar to copper, we see aluminum prices primarily being beholden to the trajectory of global growth in2019. This translates to a softening in prices into 2Q19, a recovery back to $2,000/t in 3Q19, and a fall back below $ 1,900/t by year-end. That being said, relative to global growth, aluminum screens the cheapest among the metals under our coverage, which could act to support prices over any near-term selloff.The risks to our forecast are skewed to the upside as China's stimulus could boost demand in excess of our forecast. Similarly, as over 50% of Chinese smelters are losing money at current prices, we could see additional production curtailments, which would further tighten our balances.Our base case scenario assumes a moderate Chinese stimulus and thus a moderate growth in China's domestic aluminum consumption which is boosted by stronger semis exports. If Chinese semis exports continue to rise at the rate seen in 2017 and 2018, then ex-China deficitsExhibit 5: Global reported aluminum inventories (LME, SHFE, CMX and China regional)Million mtExhibit 5: Global reported aluminum inventories (LME, SHFE, CMX and China regional)Million mtSource: LME, CMX, SHFE, CRU, J.P. Morgan Commodities Research? ecu 8vn 8vq£ zvs-s ZEdv 9工。N 9vun 9VUC gvMV ss w,善 COL6 Q covq LL.will clearly become more manageable, stalling the draw in aluminum exchange inventories (Exhibit 5).Primary aluminum balance by region, thousand metric