The Zhitong Finance App learned that CITIC Construction Investment released a research report saying that the much-publicized US Federal Reserve's September interest rate resolution used a 25 basis point rate hike and Federal Reserve Chairman Walsh's hawkish statement to fight inflation, putting pressure on risky assets. However, since the interest rate hike of risk assets was fully calculated in September and the interest rate hike of 25 basis points was fully calculated, after the September rate hike, the price of risk assets bottomed out and rebounded. In particular, assets with financial and commodity attributes returned to their commodity fundamentals to seek guidance. For example, copper hit new highs again, driven by low domestic inventories and favorable maintenance of smelting plans. Aluminum also hit the 25,000 mark, driven by the reality of the shortage during the year.
CITIC Construction Investment's main views are as follows:
Industry dynamic information
Industrial metals: Prices of LME copper, aluminum, lead, zinc, and tin changed by 2.4%, 1.3%, 2.0%, and 0.5% this week; industrial metal prices are determined by “financial attributes” and “commodity attributes”. Judging from financial attributes, the Federal Reserve raised interest rates by 25 bp; judging from commodity attributes, global copper and aluminum inventories are relatively low, and China's economic recovery can be expected. Driven by the new energy industry, copper and aluminum demand growth will improve somewhat.
Gold: Interest rates were raised by 25 basis points as scheduled in September. The price of gold is sufficient to measure interest rate increases
The Federal Reserve announced in September that it would raise the federal funds rate target range by 25 basis points to 3.75% — 4.00%. The preventative interest rate hike was implemented as scheduled, and the overall statement was far-fetched. The bitmap shows that 25 basis points will be added during 2026, and the median interest rate will rise to 4.1% at the end of 2026 from 3.8% in June. However, there are differences in the number of interest rate hikes in 2027, and most people think it will be added 1 more time. The Federal Reserve raised its inflation forecast and postponed the target of a core PCE of 2% until 2029. The price of gold was affected by expectations of interest rate hikes and recovered steadily from the 4,700 US dollars/ounce mark. After the interest rate hike was implemented, fully pricing the impact of two interest rate hikes during the year. Given high interest rates on US bonds, pressure on consumption, and marginal weakening driven by AI, continuing interest rate hikes will drag down the economy. Fundamentals do not support continued interest rate hikes. At the same time, geopolitics and midterm election results are also greatly interfered with. Therefore, it is not yet possible to draw a conclusion about shifting to a continuous cycle of interest rate hikes. The impact of the September rate hike has passed, and the bottom of the gold price test has been completed, but it is still in the process of raising interest rates, limiting its upward space.
Copper: Spot is still tight, driving prices to new highs
After the impact of the Federal Reserve's interest rate hike, it coincided with the completion of the monthly exchange of domestic futures contracts. After the monthly exchange of the back structure, domestic spot reported a very high volume of 660 to 810 yuan/ton for the Shanghai Copper 2610 contract. This is closely related to the domestic spot inventory of only 89,000 tons. At the same time, copper concentrate TC fell to a record low of minus 221.89 US dollars/dry ton. The price of the by-product sulfuric acid fell continuously for about two and a half months, the by-product profit contribution continued to tighten, and the operating pressure on the smelting process continued to rise. From October to November, many domestic copper smelters will carry out planned maintenance, and electrolytic copper production is facing downward pressure. Although the Comex-LME copper price spread has turned negative, it is not enough to drive the flow of refined copper from the US. The problem of tight inventories in the non-US region is still unsolved. The position/warehouse receipt ratio of the Shanghai Copper 2610 contract is high. Coupled with the smelter's cashing in production cuts, copper prices are expected to try a new high again.
Aluminum: The recently announced ODI approval project does not yet indicate that approval is being relaxed
Baitong Energy recently announced that the company has obtained the “Overseas Investment Certificate” and the “Overseas Investment Project Filing Notice”, and ODI has been approved to open up the most important part of entering into electrolytic aluminum in Angola. Furthermore, Hongwang Group's plan to build a 120,000-ton electrolytic aluminum plant in Luwuma, Tanzania, has completed an ODI registration for non-sensitive overseas investment in Loudi City, Hunan Province. As soon as the ODI for the two projects was approved, it raised concerns in the market that overseas investment filings for electrolytic aluminum would tend to be relaxed. For example, the Baitong Energy project was launched at the end of last year. The scale of the Hongwang project is small and the provincial quota is limited. It is not possible to detect the tightness of the new ODI approval from this. Further observation is needed without too much concern. Electrolytic aluminum is also facing a shortage during the year, and the price is impacting 25,000 yuan/ton.
risk analysis
1. The global economy has declined sharply, and consumption has shrunk in a cliff-style manner; 2. US inflation is out of control, the Fed's monetary tightening exceeds expectations, and the strong dollar suppresses the price of equity assets; 3. Consumption growth in the domestic new energy sector fell short of expectations, and consumption in the real estate sector continued to be sluggish.