Carbon emission reduction+anti globalization+MMT (modern monetary theory) may make the American economy with stagflation "gene"; However, the US economic growth is slowing down. The OECD 21.09 forecasts that the US GDP growth will slow down in 21-22 (6%/3.9% respectively). S&P also lowered the US GDP growth in 21 years from 6.7% to 5.7%. Although the American economy is not stagflation at present, the economic growth is good this year and next, and the unemployment rate is reduced as a whole, there are some signs of stagflation: first, the marginal role of total demand stimulus is obviously weakening, and there is also a lack of obvious scientific and technological revolution; Second, MMT+epidemic impact+tightened immigration policy, (subsidies) led to lower labor participation rate and higher wages, and enterprise vitality declined due to higher taxes and higher wages; Third, China's PPI is highly related to the US CPI. With the increase of trade tariffs and freight rates, the US is still facing the pressure of rising commodity prices despite its self-sufficiency in energy.
According to Huatai Gushou's "How to interpret the expectation of US debt supply and demand and interest rate increase" (2021.11.04), we believe that the US apparent inflation will still be above 2.5% in 22 years, and it is expected to return to around 2% in the long run (higher than the level before the epidemic), but the return time may be longer, because the reduction of labor participation rate and the rise of rent are highly sustainable. According to Huatai Macro's Data Preview in October: "Inertia" Speed Reduction of Domestic Demand (2021.11.02), China showed stagflation data characteristics in the fourth quarter of this year. The impact of policies related to real estate and energy consumption on total demand is still fermenting; Weak demand, weak profitability and weak cash flow have repeatedly overlapped the epidemic, forming a "negative feedback". In addition, driven by the rising prices of energy and raw materials, inflation is expected to continue to rise significantly in October.
According to the STAGFATION REARS ITS UGLY HEAD (2021.10.12) of the International Financial Association, reviewing the 71Q1-21Q1 US economic history, stagflation is not uncommon, accounting for about 1/3 of the time period. According to Bloomberg, according to the statistics of major asset returns in the US stagflation cycle from 73 to 21Q1, the gold yield level is significantly higher than that of commodities, stocks, bonds and other assets.
According to the Gold Market Commentary: Monetary policy shifts may challenge gold (2021.10.7) of the International Financial Association, gold has the highest yield under the negative interest rate scenario, with an average yield of about 18.7% (about 10.8% considering inflation); When the interest rate level is maintained at 0-2.5%, the gold can still maintain an average yield of 9.5% (the yield considering inflation is about 6.2%); According to the analysis of the International Financial Association, when the U.S. interest rate exceeds 2.5%, it will have a long-term negative impact on gold. The average yield is 2.7% and the average yield after considering inflation is - 0.6%.
We expect global refined copper supply to remain tight in 22-23. In the short term, there may be disturbances in overseas supply, but consumption is weak under the regional power rationing policy, the atmosphere of national strict control over commodity prices continues, and the Federal Reserve reduces bond purchases. We are cautious about copper prices, lacking momentum for sustained growth, and it is expected that copper prices will remain volatile. In the medium and long term, the rapid development of the new energy sector has played a major role in the growth of copper demand. The gap between supply and demand may widen in 22-23 years, but copper prices may remain high due to the tightening of monetary policy.
Medium and long term: It is expected that the gap between supply and demand of refined copper will widen in 22-23, and the copper price is expected to fluctuate at a high level
According to the rule that the growth rate of capital expenditure is 2-3 years ahead of that of copper mine capacity, the capital expenditure will pick up in 18-19, and the capacity increase may be improved in 21-22, while the recovery of capital expenditure in 21 years is expected to form a large copper mine capacity expansion around 24 years.
It is estimated that the growth rate of global refined copper output will be 4.9%/3.7%/2.5% respectively from 21 to 23. In terms of primary copper ore, according to the statistics of SMM, WoodMac and Bloomberg, the global copper supply will increase by 120/78/570000 tons in 21 to 23 years, and the increase will mainly come from Zijin Mining, First Quantum and other large comprehensive mining enterprises, with strong capacity to put in and realize output. In terms of recycled copper, with the gradual control of the global epidemic, and the implementation of China's rules for the treatment of scrap copper in 20H2, and the high copper price stimulus, based on ICSG data, we expect the global supply of recycled copper to recover to the level of 19/18 in 21/22, continue to maintain a positive growth in 23 years, and expect to increase by 22.5/204/129000 tons respectively in 21/23 years. Considering that the yield of copper concentrate to refined copper metal is 100%, we expect that the global refined copper supply will increase by 120/94/650 thousand tons from 21 to 23, with a year-on-year growth rate of 4.9%/3.7%/2.5%.