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1、Global Commodities Research25 November 2019J. P MorganCorrectiorf(firsTpubnsHed 22 November20l9)Metals QuarterlyA different type of reflationGlobal Commodities ResearchNatasha Kaneva(1-212) 834-3175JPMorgan Chase Bank NAGregory C. Shearer(44-20)7134-8161J.P. Morgan Securities plcThomas Anthonj AC(44
2、-20) 7742-7850J.P. Morgan Securities plcLadislav Jankovic AC(1-212) 834-9618J.P. Morgan Securities LLCLorenzo Ravagli, PhD(44-20) 7742-7947J.P. Morgan Securities plc Since our latest Metals Quarterly report in September, two of the central threats to the global economy have eased moderately, lifting
3、 some of the major downside tail risks out of our outlook. Providing more fundamental support to easing geopolitical tensions, we see signs of stabilizing growth, particularly in manufacturing. Our economists are gaining conviction that decreased geopolitical tension and policy easing will delay a r
4、ecession, lift growth and extend the expansion next year. Given this extension, the current 2018-2019 slowdown should be viewed as a third intra-cycle reset that will be followed by a return to above-trend global growth next year. During previous non-recessionary growth inflection points (98, 03, 05
5、, 12 and ”6), base and precious metals have returned 40% and 14%, respectively, on average, in the 12 months following a bottoming in the global manufacturing PMLThis average performance is heavily skewed by pre-Global Financial Crisis (GFC) returns, though, which averaged 59% for base and 28% for p
6、recious metals over the PMI bounces in 98, 03, and 05. Post-GFC returns，12 and 46) have been decisively more subdued, averaging only 12% for base metals and resulting in an outright contraction of -7 % for precious metals. The 2012 slowdown was followed by a tepid recovery and dreadful returns in th
7、e metals sector (-6% for base/-20% for precious), likely influenced by Chinas reluctance to stimulate as well as the Feds miscommunication about its intentions. The second intra-cycle reset of 2015-2016 was followed by two years of strong and synchronized global growth, boosted by China stimulating
8、in earnest and the Fed explicitly on hold, enhancing metals returns (31% for base /5 % for precious). Reminiscent of 2012, while firming global growth will be positive for cyclical commodities, Chinas reluctance to stimulate should ultimately cap the performance of China-sensitive industrial metals.
9、 We revise our 2020 base metals price forecasts higher but are not calling for a massive reflationary boost to base metals. In precious metals, as was the case in 2016, growth uplift alongside a Fed explicitly on hold should be inherently positive, but not uber-bulIish for gold. We trim our gold and
10、 silver forecasts but havent turned bearish on the sector, as we think the bar for the market pricing in rate hikes by the Fed is still extremely high.See page 52 for analyst certification and important disclosures, including non-US analyst disclosures.J.P. Morgan does and seeks to do business with
11、companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.0 b 一二一 .6LCC8vn zvm Rue
12、 9Ln 9LCC Lovnr STUC ，w_Ln covm eoTue 三ce ovnc OTUWgovernment remains muted as the government tries to control debt levels and seeks to limit speculation in residential real estate. Finally, we see copper demand from the Chinese electrical sector growing only about 2% yoy next year, as major upgrade
13、s in both urban and rural power grids will likely be completed by the end of this year, one year ahead of the official schedule. Put together, we now forecast Chinas copper demand will increase 1.7% yoy, a significant markup vs the 0.5% contraction we previously forecasted (Exhibit 5).Exhibit 5: Chi
14、na copper demand growth by sectorPercento(yExhibit 5: China copper demand growth by sectorPercento(y Electrical network Housing sectorSource: BGRIMM, J.P. Morgan Commodities ResearchScrap to become a drag on demandIn contrast to 2019, our base case scenario assumes hardly any boost to Chinas copper
15、consumption from reduced scrap supply in 2020. China has banned low grade category 7 scrap imports from December 2018, and as of July 2019, consumers wishing to import high grade category 6 scrap are also required to possess import licenses and obtain import quotas. This means that for most of the y
16、ear so far, importers have been able to meet their needs with category 6 imports. With the higher average grade of imported scrap, the copper content on imports in Jan-Sep was almost unchanged (down only 40 kmt) compared to the same period last year (Exhibit 6).Under Chinas new suggested scrap polic
17、y, the country is planning to re-categorize high grade/clean copper scrap as secondary material rather than solid waste. Under such a standard, category 6 clean high-grade copper scrap would be regarded as a raw material (like copper concentrate) rather than a solid waste, and therefore would no lon
18、ger be subject to import restrictions. All other types of copper scrap would be classified as solid waste, and their imports would likely be fully banned from 2020 onwards. While the exact date for the re-classification has not been set yet, the expectations are that it could be announced as early a
19、sMarch or April 2020. Taking into account the time it takes to adjust to various changes in the custom codes and definitions, the new standard could realistically go into effect by July 2020. Until it goes into effect, the quota system (for category 6 scrap) will likely remain in place. Starting in
20、2021, though, China plans an outright ban on all scrap imports. Stepping out of the weeds, the broad takeaway is that we think the move away from scrap imports will be managed in such a way going forward that there will not be shortages in China and thus do not see tight scrap supply aiding Chinese
21、refined demand growth in offing.Exhibit 6: Average grade of imported copper scrap into China Percent90% / 80% -M70% -I60%40% - ArvSource: LME, SHFE, China CustomsMine supply set to bounce backLargely offsetting demand downgrades this year, mine disruptions have been running ahead of expectations. Ye
22、ar to date, we have removed almost 80() kmt of supply from our balance, the highest amount since 2012 (Exhibit 7). This is equivalent to 72% of our initial production disruptions expectations at the start of the year, or equivalent to a 3.6% disruption allowance with one quarter to go.We started the
23、 year assuming 1% mine production growth for 2019 as a whole, as supply growth from new projects in the Americas and Africa were to be offset by the expected 50% reduction in output from Grasberg as the mine transitions firom open pit to underground mining. This estimate has now dropped to a 0.3% de
24、cline. The main changes to the mine supply forecast this year have occurred in Chile (weather and strikes), Peru (strike) and the African Copperbelt, where a host of fiscal and legislative issues have crippled production. The single largest change was made to copper mine production in the DRC, where
25、 Glencores revised guidance for Mutanda (200 kmt/a) will see its operations suspended for at least two years, starting in 2020. In Zambia, the Nchanga and Konkola mines have beenadversely affected due to operational difficulties and limited equipment availability as well.Exhibit 7: Difference betwee
26、n JPM estimates and realized copper mine productionThousand mt200 mn-800 -Source: Company reports, government and industry data, USGS, Antaike, CRU, WoodMackenzie, J.P. Morgan Commodities ResearchBy 2021, we expect a trickle in production to become a flood (+5.2%) as supply from new projects (Kakula
27、, Chuqui UG, QB2, Minta Justa, Timok and expansion at Spence) will hit the market alongside boosted production from mines like Grasberg, Oyu Tolgoi and Olympic Dam.Exhibit 8: Global copper mine production growth estimatesPercent change, yoySource: Source: Company reports, government and industry dat
28、a, USGS, Antaike, CRU, Wood Mackenzie, J.P. Morgan Commodities ResearchIn 2020, led by Grasberg, positive mine production growth (+2.2%) should return as falling output from existing Sx/EW mines is offset by growth supply from new projects (Exhibit 8). In Chile, supply should be driven by Chuquicama
29、ta and further growth from the Escondida and Collahuasi mines. Elsewhere in Latin America, we expect to see strong growth from Cobre Panama and Mirador as those mines ramp up to capacity. Finally, in Australia, Carrapateena should contribute 60 kmt to global mine supply additions next year. The risk
30、s, however, are firmly skewed to the downside given how much production growth is coming from South America-a region besieged by social unrest at the moment. So far the unrest has had a limited impact on production and export capacities, but the worry is that logistics will eventually become impacte
31、d. Moreover, there are 15 labor negotiations in Chile alone next year, which could lead to further disruptions.Copper supply and demand balance, thousand metric tonnes如19E2020F2021F 2022F2023F20142015201620172018Mine Production18,67719,24520,22420,11220,940growth2.3%3.0%5.1%-0.6%4.1%Refined Producti
32、on21,84422,18722,75222,92423,577growth5.5%1.6%2.5%0.8%2.9%Refined Use21,53921,73822,31222,84023,713growth3.8%0.9%2.6%2.4%3.8%Balance30544944084-136Source: Company reports, government and Industry data, USGS, Antaike, CRU, Wood Mackenzie, J.P. Morgan Commodities ResearchAsia2,7982,8943,2283,2843,4973
33、,0573,4713,8204,0994,274China1,7141,5361,6901,8081,9061,7722,0102,0402,0682,076North America2,6382,7532,8942,6762,5262,7152,8562,9032,9712,889Central & South America7,5578,0038,3458,3508,6558,7719,1759,5359,72710,031Europe1,0201,0431,0761,1031,0881,0031,0721,1421,2181,159Eurasia1,3621,3361,3961,4451
34、,5301,7581,8051,8451,9241,986Middle East254280328341381392398421447456Africa2,0831,9831,9892,0652,3102,5462,9113,2393,5133,551Oceania9659529698489538981,016989952945Mine Production18,67719,24520,22420,11220,94021,13922,70423,89324,85125,291I Refined Use201420152016201720182019E2020F2021F2022F2023FAs
35、ia13,51213,97614,57715,26015,97316,21716,47516,79317,21817,644China9,77310,15110,61411,16811,87312,08912,27612,46712,72213,000North America2,2132,1882,2312,1882,2622,2742,2882,3212,3562,394Central & South America582537470429436448450463501511Europe3,5973,6253,6483,5913,6453,4563,4733,5213,7723,727Eu
36、rasia622447418399401401404412419423Middle East734706757768796793800816830846Africa255244193185181183183186205217Oceania22141819191919191919Refined Use21,53921,73822,84023,71322,31223,79124,09224,53025,32025,781Global Balance201420152016201720182019E2020F2021F2022F2023F |Refined Production21,84422,18
37、722,75222,92423,57723,89924,18324,87625,63226,105Refined Use21,53921,73822,31222,84023,71323,79124,09224,53025,32025,781Source: Company reports, government and Industry data, IISGS, Antaike, CRU, Wood Mackenzie, J.P. Morgan Commodities ResearchAlternative scenarios to copper base-case viewRisk biasS
38、cenariosForecast ranqe under risk scenario$4,700/t for 2020$7,375/t for 2020B a h a)G,oba, economic growth momentum deteriorates and declining consumer sentiment signals an increasing likelihood of recession; b) Trade tensions re-escalate with the US enacting further tariffs on China; c) mining disr
39、uptions come in less-than-expected in 2020 adding to already stronger mine production growth yoy; d) Chinese economic growth continues to decelerate, weighing on demand.Bullisha) Chinese demand surprises to the upside as stimulus Bullish: measures are more impactful than expected; b) a grand deal is
40、struck between the US and China that rolls back tariff s; c) global manufacturing and economic growth outperforms expectations, providing a supportive environment for commodities; d) mine disruptions escalate again in 2020 and/or strikes in Chile impact exports; e) US$ weakens meaningfully.Source: J
41、.P. Morgan Commodities ResearchAluminum-Range-bound market likely in 20206EEW 6V-SUL 6LCC 8L6 d 8VON 8 二。0China is on track to deliver a record primary aluminum deficit in 2019, while the world ex-China market is largely balanced. After two consecutive years of deficits, the global aluminum market w
42、ill likely transition into surplus in 2020 as Chinese production is set to rise substantially. Support for the LME price has diminished due to looser balances and a declining cost curve. We keep our price forecast largely unchanged for 2020 but make a slight trim to our 2021 price projection.With th
43、e year largely complete, we now believe the Chinese aluminum market is on track to deliver a record deficit in 2019. In contrast, following two years of deficits that exceeded 1.0 million tonnes, the world exChina market will likely end the year balanced. Globally this nets out to a market in a 1.3
44、mmt deficit一a surprising outcome given the horrid state of global demand. Such a massive deficit on a global scale was nearly single-handedly driven by two consecutive years of declines in Chinese primary aluminum production, a development without precedent.Despite this supply discipline, a trifecta
45、 of a struggling global automotive sector, unrelenting aluminum products exports out of China and a 26% collapse in ex-China alumina prices has proved detrimental to the LME aluminum price. Out of the base metals under our coverage, aluminum is shaping up to be the second worst performer this year (
46、after zinc), losing 4% of its value year to date.Exhibit 1: LME and SHFE aluminum pricesLHS: RMB/t; RHS: US$/tExhibit 1: LME and SHFE aluminum pricesLHS: RMB/t; RHS: US$/t14,50014,00013,50013,00012,5002,1502,0501,9501,8501,7501,650Source: LME, SHFEMoreover, stronger fundamentals in the Chinese aluminum market (total reported stocks in China are down 30% YTD as a direct result of the deficit) compared with the rest of the world has solely manifested through a relatively stronger SHFE price, up 4.3% YTD, rather than pressuring RoW prices higher too. As a result, the p