SMM News: In 2010, non-ferrous metals did not perform prominently in the commodity market, and did not continue the trend of rising across the board in 2009. Varieties are clearly differentiated and fluctuate more frequently. Although the annual increase of copper, nickel and tin is more than 20%, the performance of aluminum, zinc and lead is poor.

　　 This is mainly due to the fact that China's 4 trillion investment effect in 2010 is coming to an end, China's full-line replenishment factor has begun to fade, and the fundamental differences in basic metals have begun to become prominent. In addition, the euro crisis and the inflation problem in emerging market countries have gradually surfaced, becoming the trigger for the overall violent fluctuation of base metals in 2010.

　　 Looking forward to 2011, in the context of the overall recovery of the global economy, it is expected that basic metals will maintain a volatile upward pattern as a whole, but the differentiation of various varieties will be more obvious. In addition, affected by macro factors, a few varieties may fluctuate more than 2010.

　　The first quarter of next year is a critical time

　　 The euro crisis in the first half of 2010 and the tightening of monetary policies in emerging markets such as China once triggered major adjustments in base metals. It is expected that the euro sovereign debt problem will continue to be the focus of the international financial market next year, especially in the first quarter of next year, Greece and other countries in the euro zone will conduct a new round of concentrated national debt financing. The obvious fall, the euro may face a new round of selling pressure, which is also quite detrimental to the base metal market. Of course, if the European Union and other countries help Greece and other countries to overcome financing difficulties next year by expanding the rescue fund, there may be short-covering in the market, which will surely promote the rise of base metals across the board. Therefore, from the perspective of the macro environment, the end of the first quarter of next year will be a more critical time window for the market.

　　China factor may be diminished

　　From a fundamental point of view, in 2010, China's demand factor has significantly weakened the pulling effect of basic metals, and the physical import of copper and other varieties has shown a negative growth year-on-year. The demand in Europe and the United States has recovered significantly, but it has not yet returned to the pre-crisis level. Taking into account that the Chinese government has made it clear that it will resume normal monetary policy in order to achieve the goal of stabilizing the price level. Even if China’s Twelfth Five-Year Plan is officially implemented next year, under the constraints of controlling inflation, China’s basic metal demand in 2011 will not be able to reproduce the rapid growth of 2009; while European and American demand is constrained by the economic structure, and there will be room for additional demand growth. limited. Therefore, in 2011, the global economy will continue to recover and the demand for base metals will maintain steady growth, which will be a high probability event.

　　Innovative products will amplify investment demand

　　 It is worth noting that the commodity investment market is showing signs of accelerated innovation after the financial crisis. At the end of 2010, ETF SECURITIES launched an ETF investment tool that directly invests in LME spot metal warehouse receipts. From the perspective of the precious metal ETF investment market, ETF investment tools have developed rapidly in recent years, and their influence on the market has been increasing. For example, silver rose more than gold in 2010 and became a star investment product for precious metals. The successful operation of its ETF investment tool iShares Silver Trust has become the main driving factor. The ETF currently holds about 50% of the annual silver output, which can fully control silver. Price trend. If the physical ETFs of basic metals copper and nickel also replicate the success stories of precious metals ETFs, it will undoubtedly rewrite the market supply and demand structure and enlarge the investment demand of the basic metals market.

　　The probability of a strong copper price is higher

　　As far as various types of basic metals are concerned, copper metal is almost the same optimistic product in the current market, and most of the annual average price forecasts are above 10,000 US dollars. In addition to China's huge demand rigidity, slow supply growth is also the main reason for the market to be bullish. At the end of the year, the International Copper Association predicted that the global copper supply in 2011 will have a supply gap of about 300,000 to 400,000. However, we believe that supply problems cannot stimulate the continuous surge in copper prices. In 2010, the international copper price broke the record high, and the high copper price's inhibitory effect on demand began to appear. As a result, China's domestic copper price in 2010 maintained a negative spread relative to the LME copper price for most of the time. We believe that the key to the surge in copper prices lies in whether the investment demand represented by commodity ETFs can expand the supply and demand gap, thereby magnifying the copper metal replenishment effect in China in 2011.

　　 Generally speaking, we believe that base metals will continue to fluctuate upward in the first quarter of next year. However, in the second half of the year, base metals may again differentiate significantly. Among them, copper is more likely to remain strong, while the trend of zinc is hard to say. optimism.