In commodity investment, there is a class of interesting asset classes that deserve attention. They often inadvertently lead the market, which is called “small metals”.

Investors often call small metals such as lead, zinc, nickel, tin, vanadium, titanium, indium, zirconium and tungsten, which have smaller market capacity than copper and aluminium. In 2018, the “palladium gold” in the family of small metals, with an 18.6% increase, became one of the best performing commodities of the year. Meanwhile, in the past decade, the asset had the highest annual growth for four years, which is the most popular commodity.

What is the reason for the unique charm of such assets? How does a small periodic table of elements become a “treasure map” of capital market?

The first is the shift in commodity bull-bear cycles. Both basic metals and small metals can not escape the price cycle driven by supply and demand gap, and its operation cycle naturally follows the macroeconomic cycle. After 2015, the effect of global monetary easing began to show, the United States took the lead in stabilizing and recovering the economy, Europe and China also experienced a cyclical rebound, commodities bottomed out, metal plates stepped out of the cyclical inflection point at the same time, and “small metals” took advantage of the trend to rebound. In the early period of the collapse, the shrinkage of the supply of basic metals by major international commodity giants also affected the output of small metals, making small metals such as small supply elasticity, and most of the associated varieties prone to unexpected market.

Secondly, domestic policy support. In recent years, factors such as supply-side structural reform, environmental protection and production restriction, as well as industrial transformation promoting consumption increase, have driven metal prices from both ends of supply and demand. In order to protect the limited precious resources, China has integrated the rare earth industry substantially since 2009. In terms of policy, it has also strictly controlled the access, mining, smelting, export and other links: export quota has been reduced substantially, emission standards for rare earth industrial pollutants have been promulgated, and taxes and fees for rare earth resources have been raised 10 times. The situation of tightening export and protecting the industry is obvious. In the field of small metals, domestic production accounts for the vast majority of global production.

The second is the effect of money rush. In recent years, under the background of favorable macroeconomic policies, the metal market has been divided. Compared with the varieties of large-scale industries, the price fluctuation of small metals with small market capacity and short industry cycle is relatively frequent and considerable, which often becomes an important logic of fund “hoarding”.

It is worth noting that in recent years, the development of new energy economy and clean energy has shown an explosive growth trend, especially in the automobile industry. The industrial demand for lithium, palladium, cobalt and other small metals has increased dramatically, and prices have been boosted.

These factors directly or indirectly affect the spot price fluctuation of “small metals”. From the point of view of domestic investment, listed companies in Shanghai and Shenzhen have the production and processing enterprises of the above-mentioned small metal resources deposits, which are called small metal concept stocks, and their share prices often fluctuate with the current price changes. When the wind blows, funds and institutions often come in heavily.