The market uncertainty increased, oil prices fell sharply.
The oil price dropped sharply yesterday. According to the data from EIA, the decline in crude oil inventory is basically in line with market expectations, and distillate oil inventory has also dropped more than expected. We believe that the adjustment of oil price mainly reflects the uncertainty of market supply and demand. On the one hand, it is the second outbreak of the epidemic, European travel restrictions may cause demand growth to stagnate or even fall again. On the other hand, OPEC has not clearly stated that it will postpone its production increase plan early next year. In addition, the current U.S. fiscal policy has been delayed in reaching the agreement, which is also crucial to the macro sentiment of the oil market. We maintain our previous neutral and bearish advice.
Strategy: Neutral and bearish relatively, reverse cash and carry arbitrage strategy on Brent, long the sixth lines and short the first line
Risk: supply disruption caused by geopolitical events and sustained sharp depreciation of the US dollar
On October 21th, 2020, the position on I2101 contract increased by 5701 and closed at ¥802.5 per ton, the position on I2105 contract increased by 565 and closed at ¥745.0 per ton.
1. Mysteel: On October 20th, BHP Billiton (BHP) released the production and sales report for the third quarter of 2020. The report shows: In terms of output: in the third quarter of 2020, the iron ore output of the Pilbara business was 74.15 million tons, a decrease of 2% from the previous quarter and increase by 7%from the same period last year. The total iron ore output in the first three quarters of 2020 was 218 million tons, an increase of 7% year-on-year. In terms of sales volume: BHP Billiton's total iron ore sales volume in the third quarter was 73.36 million tons, a decrease of 5% from the previous quarter and an increase of 7% year-on-year; of which, sales of fine ore were 48.39 million tons and sales of lump ore were 17.06 million tons. The total sales volume in the first three quarters of 2020 was 219 million tons, an increase of 7% year-on-year.
2. Mysteel: Last week, the capacity utilization rate of 247 blast furnaces industries decreased by 0.78% from the previous month to 88.41%, the capacity utilization rate decreased by 0.3% from the previous month to 92.91%, and the average daily molten iron output decreased by 8,000 tons from the previous month to 2.473 million tons, a year-on-year increase of 248,000 tons
3. In terms of spot, the PB powder in Rizhao Port was ¥867 per ton, golden bubba powder price was equivalent to ¥940 per ton,
1. In terms of supply, recently some iron ore shipping berths in Australia and Brazil are under maintenance. The total number of Australian berths under maintenance is about 2.167 million tons, and the number of Brazilian berth under maintenance is about 509,000 tons. The total amount of iron ore shipped from Australia and Brazil has increased, approaching a 4-month high point. The proportion of iron ore shipped to China has increased, and the overall supply pressure is greater. In terms of demand, the average daily molten iron output has decreased, and the average daily port dredging has decreased, coupled with environmental protection restrictions and new blast furnace maintenance, overall demand has weakened. In terms of ports, the pressure on ports increased while the dredging port decreased. Iron ore port inventories continued to accumulate. In addition, due to the release of the latest real estate data was weaker than expected, there is still a greater pressure to reduce prices in later stages, but the range of discount is relatively large. It is expected to be weak and volatile. It is suggested to long 01 coking coal and short on 01 iron ore.
2. Option strategy: It is advised to hold the short position on i2101-C-870. (For reference only)
It is rumored that the price of filament has increased while the production and sales are increasing, TA basis has weakened again.
In October, we will continue to estimate the de-stocking, follow up by the implementation of the overhaul and the continuity of demand improvement. There is an expectation of rigid accumulation in November and December.
In terms of the unilateral strategy, it is advised to be neutral; for the strategy across varieties, the current TA pattern is long in short-term and short in long-term, in late October, there is a chance to continue the rebound; in addition, the accumulated warehouse concerns from November to December followed by the peak of seasonal terminal loaded, and the rebound gives space for varieties allocation; for strategy across period, it is advised to focus on the reverse cash and carry strategy opportunity after the next round of TA overhauls fulfilling and rebound of 1-5 spread. It is advised to focus on PTA factory inspection and fulfillment wishes, and the downstream restocking space and improvement of demand.
RU: October 21th, 2020, the main force contract of RU01 down by 115 or 0.78% and closed at 14,635. The main force contract of JRU03 up by 9.9 or 4.77% and closed at 217.4. Yunnan WF closed at 13,800 to 14,200 yuan per ton, Hainan SCRWF closed at 14,200 to 14,300 per ton, the secondary standard rubber closed at 12,500 per ton, and Thailand’s RSS3 closed at 18,350 to 18,550 yuan per ton.
NR: The main force contract of NR12 down by 45 or 0.42% and closed at 10,715. The main force contract of TF12 up by 3.2 or 2.02% closed at 161.8. the price of Qingdao rubber in USD was narrowed. The spot or CIF of STR20 was $1,670 to $1,690 per ton. The CIF of SIR20 in October was $1,600 to $1,610 per ton. The CIF of mixed rubber from Thailand in December was $1,610 per ton to $1,620 per ton.
Media news: Recently, Yokohama announced the merger of its various off-highway tire (OHT) businesses into one entity (Yokohama Off-Highway Tires) to enhance its brand power and tap growth potential. Yokohama spent US$1.18 billion in 2016 to acquire the ATG farm and the OTR tire manufacturer. The new company will have offices in Tokyo, Boston, Amsterdam and Mumbai, and its leadership team will cover the world.
Futures Operation Advice: The domestic price of latex in Hainan continues to be high, and the production of concentrated latex is reported to be 16600 yuan/ton. The highest price is 17,300 yuan/ton. The inventory in Qingdao Free Trade Zone is about 122,000 tons, and the amount is about 1.4% decrease on a week-on-week basis; the out-of-zone, the inventory is about 701,000 tons, and the amount is about 1.8% decrease on a week-on-week basis. The enthusiasm of downstream tire dealers to receive and buy goods decreased, and the number of shipments of primary dealers also decreased. For the main RU01 contract, it is suggested to focus on the support position of 14300 point. (For reference only)