Crude oil

Gasoline cracking spread has fallen, and excess volume of refined oil has caused concerns in the market

Recently, the gasoline cracking spread in the United States has been significantly weakened. We believe that there are two main reasons. One is that the current U.S. gasoline is shifting to winter grades. Due to the increase in the Reid vapor pressure standard (RVP), more n-butane can be added to the gasoline, it means that more kerosene and jet fuel components can be transferred to the gasoline pool. Due to the high inventory of distillate oil in the United States, refineries began to convert part of the distillate to gasoline. In September, the U.S. gasoline yield hit a record high, that is, the second transfer occurred due to the oversupply of refined oil. (the first transfer was from jet fuel to diesel). Although diesel inventory has recently declined, the performance of gasoline is still under concern; the second is that according to the current Apple mobile phone mobile index, it has begun to gradually turn down, the demand performance of gasoline is also under concern, especially in the absence of stimulus policy, unemployment and work from home have stalled the recovery of gasoline demand.

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

Iron Ore

On October 22th, 2020, the position on I2101 contract increased by 3464 and closed at ¥793.5 per ton, the position on I2105 contract increased by 437 and closed at ¥738.0 per ton.

【Important Information】

1. Mysteel: The number of imported iron ore in 45 ports across the country was 12415.58, an increase of 177.06 from last week; the average daily port volume was 308.29 dropped by 3.56. In terms of volume, the volume of Australian ore was 5858.12, increased by 4.65, Brazilian ore was 3700.38, increased by 180.09, trade ore was 5996.10, increased by 181.7, pellets were 976.96, decreased by 12.11, refined powder was 1208.14, decreased by 9.46, lump ore was 2557.74, increased by 28.84, coarse powder was 7674.74, increased by 169.79; the number of ships in port was 151, decreased by 14.

2. Mysteel surveyed 247 steel mills and concluded that the operating rate of blast furnace is 88.28%, a decrease of 0.13% from the previous week and an increase of 5.60% from the same period last year; the blast furnace ironmaking capacity utilization rate was 92.34%, a month-on-month decrease of 0.57%, and a year-on-year increase of 9.57%; the profitability of steel mill was 90.04 %, remains the same on month-on-month, a decrease of 0.87% on year-on-year; the average daily metal output was 2,457,900 tons, a month-on-month decrease of 15,100 tons and an increase of 254,700 tons year-on-year. Mysteel surveyed 163 steel plants with an operating rate of 68.37%, an increase of 0.14% month-on-month, and a capacity utilization rate was 77.65%, an increase of 0.40%. The utilization rate excluded the eliminated capacity was 84.53%, an increase of 3.37% over the same period last year. The profitability of steel mill was 78.53%, down 0.61% from last week.

3. In terms of spot, the PB powder in Rizhao Port was ¥866 per ton, golden bubba powder price was equivalent to ¥946 per ton,

【Trading Strategy】

1. In terms of supply, recently 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)

PTA

Polyester production and sales continue to decline.

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.

Natural Rubber

RU: October 22th, 2020, the main force contract of RU01 up by 15 or 0.10% and closed at 14,875. The main force contract of JRU03 up by 2.4 or 1.10% and closed at 219.8. Yunnan WF closed at 13,800 to 14,150 yuan per ton, Hainan SCRWF closed at 14,150 to 14,250 per ton, the secondary standard rubber closed at 12,300 per ton, and Thailand’s RSS3 closed at 18,300 to 18,500 yuan per ton.

NR: The main force contract of NR12 up by 50 or 0.46% and closed at 10,975. The main force contract of TF12 up by 0.4 or 0.25% closed at 162.2. the price of Qingdao rubber in USD was narrowed. The spot or CIF of STR20 was $1,680 to $1,700 per ton. The CIF of SIR20 in October was $1,610 to $1,620 per ton. The CIF of mixed rubber from Thailand in December was $1,615 per ton to $1,625 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 16,600 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)