Morgan Stanley Fund: How will non-ferrous metals perform during the interest rate cut cycle?

According to Zhitong Finance APP, Morgan Stanley Fund stated that the world is currently in a rate-cutting cycle. As the PMI rebounds, the demand side is expected to continue to warm up, and the industrial economy is in the stage of recovery from a major cycle bottom. Looking ahead to next year, the logic for the rise of non-ferrous metals is expected to shift from being primarily driven by supply-side logic this year to demand-side driven.

Domestically, policies have shifted since the end of September, and there are expectations for further policy support, which is likely to improve the fundamentals. Overseas, the policies implemented after Trump took office may keep U.S. inflation high, or even rebound and cause secondary inflation, which would benefit the rise of bulk metals. From the supply side, the elasticity of copper and aluminum supply remains low next year: copper concentrate TC processing fees are still at a low level, indicating a relatively tight state at the mine end; the operating rate of domestic electrolytic aluminum is over 90%, with a production capacity ceiling of 45 million tons, and the new supply next year is expected to be no more than 2%. If the demand side shows a strong recovery next year, the supply-demand gap will further widen compared to this year, and industrial metals are expected to be in a state of easy rise and difficult fall.

For precious metals, from a long-term perspective, inflation, central bank gold purchases, and geopolitical factors are expected to support their continued strength, while in the short term, gold prices are expected to maintain a wide range of fluctuations to digest valuations. Compared to gold prices, equities have performed poorly, mainly due to the poor performance realization of many companies in Q3.

For energy metals, lithium prices have repeatedly confirmed their bottom. On one hand, there is cost support below, and on the other hand, since Q4, many overseas and domestic mines have reduced production, which is conducive to improving the oversupply situation. In the short term, prices may show fluctuations along with production schedules, and the subsequent price center needs to rely on the real replenishment power from downstream to support the rise. In the medium to long term, the supply-demand fundamentals of lithium may have already bottomed out. Regarding cobalt, attention should be paid to the implementation of policies in the Democratic Republic of the Congo and its impact on the supply side of the industry. Currently, both commodities and equities are at the bottom range, focusing on the rebound in the equity sector driven by performance recovery and disturbances in cobalt supply.

For minor metals, tungsten, tin, antimony, and rare earths are all strategic metals in China, with good constraints on the supply side, and the supply-demand fundamentals are relatively good. The supply side often experiences disturbances that lead to short-term supply-demand imbalances and significant price increases. In terms of rare earths, the intensifying conflict in Myanmar raises concerns about import supply, leading to a rebound at the equity bottom. The marginal slowdown in supply growth may support the price trend of rare earths. Attention should be paid to the promotion of energy-saving motors, the return of price-sensitive demand in wind power, and new application directions such as robotics that boost long-term demand expectations for rare earth magnetic materials. For tungsten, prices have stabilized after falling, waiting for demand recovery, and tungsten prices may return to an upward channel. For tin, short-term prices are under pressure due to macro influences and rumors of Indonesia's resumption of production, but tin prices have strong cost support, and attention should be paid to the semiconductor cycle recovery's impact on tin prices. For antimony, recent export controls on antimony oxide have led to a divergence in antimony prices domestically and internationally, with a price difference reaching nearly 100,000 RMB. Future attention should be paid to the progress of export approvals and the convergence of domestic and international antimony prices