Market Close Jan 26

Guizhou Maotai and rare earths lead Chinese rally

Chinese stocks remain buoyant despite sporadic Covid outbreaks, mass lockdowns and a stay-at-home order for the coming Lunar New Year celebrations

Guizhou Maotai and rare earths lead Chinese rally
The Shanghai and Shenzhen stock markets remain in good shape despite bad news. Image: Reuters 

(ATF) There have been sporadic Covid 19 outbreaks in various parts of Asia, including China, but this has not hindered the momentum of the markets. Despite bad news over the weekend, such as the effective cancelling of Chinese New Year, the Shanghai and Shenzhen stock markets resisted stubbornly for most of Monday January 25, before seeing a late decline.

At the end of the trading session the Shanghai Composite Index closed at 3,624.24 points, a slight increase of 17.49 points, or 0.48%, and a new five-year high; the Shenzhen Component Index closed at 15710.19 points, a slight increase of 81.46 points, or 0.52%, for a five-year and seven-month high.

The new energy sector in the intra-day market saw a strong influx of fund buying, which eased in the afternoon. However, the winemaking sector, bucked the trend and rallied all day, with Moutai rising nearly 5%. The turnover of the A share markets once again exceeded 1 trillion yuan.

Rare earth stocks continued to be active, as Huahong Technology and Shengxin Lithium Energy reached daily limits, and Northern Rare Earth rose 4.54%.

On the supply side, since mid-December rare earth prices have continued to soar. Among light rare earths, the prices of praseodymium oxide, neodymium oxide, and neodymium praseodymium oxide have increased compared with the beginning of the week. In the medium and heavy rare earths, the rising trend of terbium continued, and dysprosium stabilized slightly. With the downstream demand stimulating major domestic NdFeB expansion, plans to increase production capacity and demand for permanent magnet materials may usher in explosive growth.

METALS, ENERGY STOCKS UP AND UP

The stock prices of A share energy and metal firms have performed strongly recently, with Jiangte Electric and Rongjie both increasing by more than 20%. Overseas lithium hydroxide targets Galaxy Resources and Orocobre have also recorded increases. Essence Securities analysts expect that metal prices across the board this week will rise.

Rare earth magnetic materials have the largest downstream demand among rare earths. The compound annual growth rate in the next five years will be 35%, it is estimated by Tongshun-Shenzhen Institute. The total annual demand for neodymium iron boron is 372,000 tons, compared to demand for praseodymium neodymium oxide of 125,000 tons.

On the supply side, overseas mines are close to full production, China’s domestic indicators are strictly controlled, and the increase in three to five years is limited. According to estimates, the current supply of neodymium praseodymium oxide is about 58,000 tons, and it is relatively rigid, with compound annual growth of 13% expected for demand in the next five years. The gap between supply and demand is obvious, and the supply and demand of praseodymium and neodymium have ushered in a major turning point.

LITHIUM CARBONATE DEMAND STRONG

The price of lithium carbonate continued to rise this week. The suspension of production of some large lithium salt factories during the Spring Festival led to continued tension on the supply side, and the upward trend in prices continued.

The price of battery-grade lithium carbonate was driven by the price of industrial carbon and the downstream boom. The price of lithium hydroxide has also increased this week.

With the digestion of lithium hydroxide inventory and the improvement of the downstream boom, it is expected that the stagnant price of lithium hydroxide will enter the up channel.

COBALT COSTS INCREASE

The overall price of cobalt salt has risen in the last week. At present, the epidemic situation in South Africa has not yet improved. The inventory of cobalt intermediates is tight, and the transaction price of cobalt intermediates still has room to rise due to raw material concerns. Due to the impact of the Spring Festival and the epidemic, the downstream demand for cobalt sulfate increased and the transaction price continues to rise.

Cobalt tetroxide market is more concentrated and more sensitive to changes in raw material prices. Prices are expected to continue the upward trend under tight raw material inventories.

NICKEL RECOVERS

The LME price of nickel rose by 0.86% month-on-month, and the price of nickel futures entered a strong rally.

First, macroeconomic benefits were fully reflected last week, and second, the market risk aversion will continue to boost nickel. The price of nickel sulfate rose 3% on a week-on-week basis. The main reason is that the demand for power batteries remains strong, and the main manufacturers on the supply side are basically at full production to meet demand.

Nickel sulfate stocks have been reduced for two consecutive months. The market outlook is expected to steadily improve under this demand.

ALSO SEE:

Rare earth prices go through the roof

China threatens rare earth blacklist as trade war expands

China stocks rare earths Guizhou Maotai China rally Covid mass lockdowns LNY stay-at-home Shanghai Shenzhen lithium carbonate cobalt salt nickel