Whether The "Super Cycle" Will Change: Differentiation And Uncertainty Under The Rise Of Commodities

After the Spring Festival, commodity and stock prices of Pro cyclical industries began to fall.

One of the most obvious signs is the collective flameout of the leading leader. On February 24, Zijin mining, the leading copper industry, and Jiangxi copper industry fell significantly, and Jinniu chemical industry, which ranked first in the A-share growth list in February, fell.

Commodity markets, on the other hand, have ended their rally. Among them, LME copper and Brent crude oil showed stagflation on the same day, and only the downstream chemical products prices continued to rise.

In the process of early pull-up, the voice about the coming of "super cycle" disappeared. Will the pro cyclical market, which is expected by the secondary market, come to an end?

However, the core logic supporting the cyclical commodity rise is determined by the supply-demand relationship, liquidity and market expectation of their respective industries. These factors will maintain a relatively balanced state in the short term, and will not fluctuate as violently as the prices of commodities or stocks.

The current cyclical stock market, like the trend of Jinniu chemical industry, has a huge short-term rise, but in the morning of the 24th, the limit was opened again in the afternoon.

At this stage, cyclical stocks also seem to be looking for the balance between industry prosperity and stock price.

Information map.

Can commodities still rise?

There are many factors that determine the operation of commodities, but the core is the relationship between supply and demand, which determines the direction of price operation, while the liquidity and expected strength determine the range of price rise and fall.

Compared with the rise in 2016, the bottom rebound of commodities is significantly different.

At that time, the rebound in the commodity market was dominated by domestic self pricing black goods, while the rise of international priced products was relatively backward. The main driving force was the supply side structural reform launched by China, and the contraction of supply led to the rise of prices.

At the present stage, the development of the new epidemic is the core logic that controls the changes of commodity prices, including the large-scale economic stimulus policies of various countries, and the reduction of production or demand of individual commodities.

It can be seen from the price trend of major commodities that copper, crude oil and iron ore all experienced a concentrated decline due to the outbreak of the epidemic in the first quarter of 2020, and a rebound after bottoming out around April of the same year.

In other words, this round of commodity rise started in April last year, driven by the effective control of the domestic epidemic situation, as the support for the demand for commodities in the world's largest manufacturing country.

Under the above background, commodities are also on the rise in the second half of 2020. In November of the same year, Jing Chuan, chief economist of CUHK futures, once put forward a point of view when communicating with reporters: "in the first half of 2020, the domestic manufacturing industry was suppressed by the epidemic situation, and the prices of raw materials dropped. In the second half of the year, demand was delayed and concentrated to release, resulting in the mismatch between supply and demand of some commodities, leading to price rise. If the new crown vaccine can be successfully implemented, similar situations may occur in overseas markets in the first half of 2021, which will benefit the upstream raw materials. "

The actual evolution trend is consistent with the above prediction. The vaccination started, the growth of new cases slowed down, and the recovery of overseas economy promoted the demand for raw materials in the upstream.

The overseas large-scale economic stimulus policies and excess liquidity have accelerated the recent rise of crude oil and non-ferrous metals.

In this regard, Jingchuan also attributed it to the financial attribute of copper, that is, "the supply and demand relationship supports the rise of copper price, but it will not be such a rapid sharp rise."

To some details, it is a significant increase in the recent position of related commodity futures.

Among them, the total position of Brent crude oil was 2.017 million at the end of January, and increased to 2.19 million hands by February 24. During the same period, the domestic position of Wenhua nonferrous metal plate increased from 1.264 million to 1.46 million.

There are many institutions with similar views. Chen Xing, chief Macro Analyst of China Thailand securities, also believes that "the real end of this round of price increases may need to wait for the direction of the Fed's monetary policy."

That is to say, if the economic stimulus policy continues to maintain, the current round of rising trend of commodity prices with international pricing will be difficult to end. At the same time, the development of overseas epidemic tends to be stable, which will also provide support for upstream raw materials from the demand side.

It should be pointed out that, due to the strong trend of the price operation mechanism of bulk commodities, unless the supply-demand relationship is reversed, it is difficult to reverse the upward and downward trend.

From the operation of major commodity indexes, CRB index and Wenhua commodity index, which track international and domestic packages of goods, have fallen very limited in recent two days, which may mean that the upward trend has not changed.

Cycle stocks seek new balance

The determination cycle of commodities is still in existence, but it can only solve a variable of the secondary market trend, and the greater uncertainty comes from the stock market itself. Although the industry trend is clear, it is not certain that the stock price will rise.

Far from that, the recent cases include the continuous rise of cobalt and lithium prices in early February, the adjustment of related targets, and the slight rise of LME copper price on the 24th, with Jiangxi Copper falling 6.7% on the same day.

The actual reason is difficult to explore, but in the final analysis, it is a trade "cost performance" problem.

For example, Jinniu Chemical Industry Co., Ltd., which has the largest A-share increase in February, has been trading for seven consecutive days, with a cumulative increase of more than 110% from the beginning of February to the 23rd. However, on the contrary, more than half of the company's revenue is methanol, while the settlement price of the main contract period of methanol futures increased from 2285 yuan / ton at the end of January to 2442 yuan / ton on February 23.

In the field of commodities, this increase is not prominent, and its driving effect on the company's future profit expectation will not be very obvious. The rise of stock price is more market behavior and has limited correlation with fundamentals.

However, it can not be ignored that the main cyclical industries are faced with the problem of excessive periodic growth of Jinniu chemical industry, which is particularly prominent in the non-ferrous and chemical industries with eye-catching performance after the festival.

According to statistics, from the beginning of February to 23, the average growth rate of 15 copper industry listed companies in Shenwan was 19.3%, Jiangxi copper industry was up 60.93%, Tongling Nonferrous Metals, electrical alloy and Yunnan copper industry increased by more than 30%.

However, it can be found that the profits of domestic copper smelting industry mainly rely on the smelting costs of miners. Only the copper enterprises with a high proportion of their own mines are expected to improve their profits. After the secondary market sentiment has been vented, the plate trend differentiation has become inevitable.

The rise in the petrochemical sector began as early as the second half of 2020.

From the late December of last year, Hengli petrochemical and Rongsheng petrochemical, the two leading private refineries in China, have increased by 64% since February 23 this year. You know, these are two companies with market value above 100 billion.

Although the rise of international oil price after the festival has brought some expectations for the above-mentioned companies to increase the price of their products, there are also negative effects, and the cost side is facing a huge upward risk.

Even though PTA and other main products performed well after the festival, they could not help the company's share price continue to rise. Hengli petrochemical and Rongsheng Petrochemical have been falling since the first trading day after the Spring Festival.

The main products continue to rise, and the stock prices of listed companies have fallen. Recently, the A-share market has become very common.

In January, the star plate lithium battery material industry also faced similar problems. Only when the cobalt price performance was too prominent, did Huayou cobalt industry and Hanrui cobalt industry perform relatively well.

It is not difficult to see that due to the rapid growth rate of the secondary market, many cycle stocks have already overdrawn the expectation of improving the prosperity of some industries. Under the background of the recent weakness of A-share market, cyclical stocks generally begin to adjust and find a new balance.

On the positive side, the core logic supporting the prosperity of Pro cyclical industries has not changed. Some companies will see significant improvement in earnings in the next quarterly report. The potential pull up of related commodity prices in the future may also provide new rebound momentum for cyclical stocks.

At least for now, few people will be too short on commodities, after all, the global economy is still recovering from the shadow of the epidemic.

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