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报告摘要

Regional Materials Summary

Core Content

This document provides an analysis of the regional materials sector, focusing on nickel, copper, aluminum, and steel markets in China, Indonesia, India, and the Philippines, along with related investment recommendations, market sentiment, and industry developments.

Main Points and Key Information

Nickel Market

Infrastructure Concerns: The planned nickel smelters in Indonesia face challenges due to lack of infrastructure outside Java, power shortages, licensing delays, and policy uncertainty.
Planned Projects: Several major nickel facilities are under development, with most expected to start operation in 2015–2017 (see Table 1).
China's Response: China is building NPI plants and using imported nickel concentrate, while increasing usage of primary nickel and stainless steel scrap to offset the Indonesian ore export ban.
Price Outlook: Nickel prices have had a strong run but are expected to pause due to fundamental imbalances. A pullback is likely before the uptrend resumes. VALE Indonesia is recommended as a top-rated stock with a buy rating.
Supply Constraints: Direct use of nickel concentrate in stainless steel production does not increase supply unless it leads to marginal market entry. Long-term supply may improve as CAPEX costs are reduced.

Copper Market

China's Demand: China's demand for copper is expected to grow at 6.5% per year, with restocking in 2014 increasing the rate to 10%, and de-stocking in 2015 reducing it to 5%.
Price Drivers: Copper prices are supported by electrical grid expansion, consumer appliances, and automotive growth in both China and other regions.
Inventory and Price Outlook: Exchange inventories have fallen by 405,000t, offsetting 60% of off-exchange increases. The global copper market is expected to move into deficit in 2015 and 2016, pushing prices higher.
Investment Recommendations: MMG and Jiangxi Copper are highlighted as top recommendations, with MMG having volume growth from Las Bambas.

Aluminum Market

Brazil's Drought Impact: Alcoa is reducing production in Brazil due to rising power costs, selling electricity to offset losses.
Global Outlook: The global aluminum market is expected to move into deficit as China moves from surplus to balance, while the rest of the world faces capacity closures.
Price Forecast: Aluminum prices are forecast to rise from USD1,720/t to USD2,100/t by 2017, driven by cost-push inflation.
China's Consumption: China's aluminum consumption remains healthy, with long-term growth of 7–9% per year.

Steel Market

Price Pressure: Baosteel has cut prices for June, with further cuts likely in July. Steel prices are expected to remain weak due to overcapacity and slowing demand.
Inventory Build-Up: Seasonal demand slowdown and record production are expected to lead to inventory increases.
Regional Performance: Guangdong province saw rising credit defaults, with Foshan and Dongguan being the focus. Steel exports to Mexico, South America, Europe, and the U.S. increased significantly in 1Q14.

Investment Recommendations

Nickel: Recommend VALE Indonesia (INCO IJ; IDR3,950; BUY; TP IDR4,600). Buy nickel exposure on dips.
Copper: Recommend MMG (1208 HK; HKD1.91; BUY; TP HKD2.45) and Jiangxi Copper (358 HK; HKD12.66; BUY; TP HKD15).
Aluminum: Sell Angang Steel (347 HK; HKD4.59; SELL; TP HKD4.00).
India: Recommend Sesa Sterlite (SSLT IN; INR197.15; BUY; TP INR252) if the BJP-led NDA wins the elections, improving market sentiment.

Market Sentiment and Trends

China's Economic Policy: The government is focusing on restructuring rather than stimulus, which supports long-term growth in copper and aluminum consumption.
Power Constraints: Brazil's drought and high power costs are forcing Alcoa to reduce production, while China's power investments support copper and aluminum demand.
Seasonal Factors: Seasonal demand slowdowns in steel and copper are expected to lead to inventory increases and price pressure.
Inventory Trends: Copper exchange inventories have declined, while off-exchange inventories remain a concern. Nickel inventories are also expected to decline.

Key Figures and Data

Planned Nickel Facilities in Indonesia: Table 1 lists 12 major projects with varying capacities and start dates.
Copper Supply/Demand Forecast: Figure 2 shows a global deficit for 2015 and 2016, pushing prices higher.
Aluminum Supply/Demand Forecast: Figure 4 indicates a global deficit as China moves to balance and high-cost capacity is closed.
Steel Price Performance: Figures 6 and 7 highlight Baosteel's price cuts and inventory pressures.

Supporting Analysts

HK/China: Alexander Latzer (metals, coal, steel)
India: Anubhav Gupta (metals, steel)
Indonesia: Isnaputra Iskandar, CFA (metals, coal, cement)
Philippines: Ramon Adviento (metals, coal), Lovell Sarreal (cement, consumer, media)
Singapore: Yeast Chee Keong, CFA (oil/gas services, gem technology)
Thailand: Sutthichai Kumworachai (coal, energy, oil/gas, petrochemical), Surachai Pramualcharoenkit (steel, construction, contractors, automotive)
Vietnam: Trung Thai (construction, materials, property)

Summary of Price Trends

Nickel: Strong run, likely to pause before resuming the uptrend.
Copper: Prices are expected to continue rising due to China's demand and inventory adjustments.
Aluminum: Prices are forecast to rise due to cost-push inflation and capacity closures.
Steel: Prices are expected to remain weak due to overcapacity and slowing demand.

Conclusion

The regional materials sector is facing challenges and opportunities driven by China's economic restructuring, power constraints, and infrastructure developments. Nickel and copper show positive long-term potential, while aluminum and steel are under pressure due to costs and supply issues. Investment strategies should focus on selective buying in nickel and copper and avoiding steel due to price weakness and inventory build-up.