20180820-广发证券_香港_-A-Share_Non-Ferrous_Sector_4页_581kb

报告摘要

A-Share Non-Ferrous Sector Summary: Magnesium

Core Content

This document provides an analysis of the magnesium industry, focusing on its price trends, production levels, and demand drivers, particularly within the context of the Chinese market and its global implications. The analysis is conducted by GF Securities (Hong Kong) and highlights the impact of environmental regulations on the supply side and the long-term demand from the automotive sector.

Main Points

1. Magnesium Price Trends

Magnesium prices have risen significantly since early May.
As of August 8, domestic magnesium ingot prices increased by 18.8% to Rmb18,050/tonne, while magnesium alloys rose by 11.6% to Rmb18,800/tonne.
London metal market prices also increased by 6% to US$2,500/tonne, but the growth rate is slower than in the domestic market.
The rise in prices is attributed to environmental checks and maintenance in the summer, which reduced raw magnesium output.

2. Production Impact

Global primary magnesium production has decreased, with China being the largest producer (accounting for 87% of global output in 2016).
In the first half of 2017, China's primary magnesium production dropped by 21.4% YoY, affecting global supply.
Shaanxi, Ningxia, and Shanxi – key production regions – saw significant YoY declines in output:
- Shaanxi: 11.07%
- Ningxia: 50.94%
- Shanxi: 31%

3. Demand Drivers

Automotive sector is the largest consumer of magnesium alloys, accounting for 75% of demand.
Magnesium alloys are primarily used for lightweight vehicle manufacturing, driven by the global shift toward lighter, more fuel-efficient cars.
3C industry (consumer electronics) accounts for 15%, and aerospace and other fields account for 10%.
The trend toward lighter vehicles is expected to drive long-term demand for magnesium, supporting further price increases.

4. Supply and Demand Outlook

China is expected to face supply shortages of 273k, 193k, and 10k tonnes in 2018, 2019, and 2020, respectively.
Global supply shortages are also projected for these years.
Continued supply shortages are anticipated to support magnesium price growth, potentially returning to previous highs.

5. Stock Pick

Yunhai Special Metals (002182 CH) is highlighted as the leading company in the magnesium alloy industry.
The company has a complete industrial chain from mining to deep processing.
It controls 50 million tonnes of dolomite resources, with magnesium smelting capacity of 0.1 million tonnes and magnesium alloy capacity of 170,000 tonnes.
In 2016, it produced 120,000 tonnes of magnesium alloys, exceeding 40% of the national output.

Key Risks

Resumption of production after environmental regulations could lead to increased output.
Downstream auto demand may fall short of expectations.
Significant price declines could occur if supply and demand dynamics shift unexpectedly.

Sector and Company Ratings

Sector Ratings

Rating	Definition
Positive	Sector expected to outperform benchmark by more than 10%
Neutral	Expected sector relative performance ranges between -10% and 10%
Cautious	Sector expected to underperform benchmark by more than 10%

Company Ratings

Rating	Definition
Buy	Stock expected to outperform benchmark by more than 15%
Accumulate	Stock expected to outperform benchmark by more than 5% but not more than 15%
Hold	Expected stock relative performance ranges between -5% and 5%
Underperform	Stock expected to underperform benchmark by more than 5%

Figures and Data

Figure 1: Shows domestic magnesium ingot and silicon iron price trends.
Figure 2: Displays 2018 global magnesite reserves distribution.
Figure 3: Illustrates global primary magnesium demand in 2016.
Figure 4: Reflects current global magnesium alloy demand.
Figure 5: Shows global primary magnesium supply-demand balance from 2015 to 2020.
Figure 6: Provides estimates for China's magnesium downstream demand from 2015 to 2020.

Disclaimer and Legal Information

The report is for informational purposes only and does not constitute an offer to buy or sell securities.
It is intended solely for GF Securities (Hong Kong) clients.
The research analyst(s) certifies that the views expressed reflect their personal opinions and that no compensation is tied to the recommendations.
Disclosure of interests is provided, including no direct investment in the mentioned securities and no investment banking relationships.
The report may be subject to change and is not a substitute for professional advice.

Conclusion

The magnesium sector is currently experiencing price increases due to supply constraints caused by environmental regulations and summer maintenance. The automotive industry is a key driver of demand, and the long-term trend toward lightweight vehicles is expected to support continued price growth. Yunhai Special Metals is positioned as a leading player in the magnesium alloy industry, with strong production capacity and resource control. However, the sector is not without risks, including potential resumption of production and demand shortfalls.