Crude oil

Covid-19 in Europe continues to worsen, home isolation may restrict the consumption of gasoline and diesel

Oil prices fell sharply again yesterday, and the market is still dominated by macro sentiment. On the one hand, the two parties in the U.S. Congress failed to reach an agreement on the stimulus bill yesterday, and the possibility of reaching an agreement before the election is very small; on the other hand, the European epidemic continues to deteriorate, Italy, Spain and other countries restarted social restrictions. In addition, from the perspective of recent fundamentals, Libya has resumed production faster than market expectations. As the two major oil ports (Es sider, Ras Lanuf) resume operations, the official statement on Libya's output will reach 1 million barrels per day in the next four weeks, and the current output is 700,000 to 800,000 barrels per day. We believe that due to the recovery speed for demand slows down, oil prices will remain weak and volatile in the short term.

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 26th, 2020, the position on I2101 contract decreased by 15378 and closed at ¥769.5 per ton, the position on I2105 contract decreased by 127 and closed at ¥711.0 per ton.

【Important Information】

1. According to the media reports: Recently, HBIS Group Beijing International Trade Co., Ltd. issued a letter of credit for a 90,000-ton Brazilian SFCJ in RMB, and successfully initiated a direct settlement letter of credit for commodities in RMB with Brazil's Vale business. So far, HBIS and the world's three major iron ore suppliers (Vale, Rio Tinto, BHP Billiton) have all achieved settlement in RMB.

2. China Steel Association: The annual crude steel output is expected to exceed 1 billion tons, a year-on-year increase of 3% to 5%. It is expected that the export volume of steel products for the whole year will drop by about 15% and the import volume will increase by about 60%. From January to September, our country imported 86.846 million tons of iron ore, a year-on-year increase of 10.8%. Since June, it has exceeded 100 million tons for four consecutive months. In September, our country imported 108.55 million tons of iron ore, an increase of 8.16% month-on-month; the average import price was $110.75, an increase of 7.08% month-on-month, remaining at a high level. At the end of September, the port inventory of imported iron ore was 119.07 million tons, an increase of 10.4% from the lowest point at the end of June.

3. In terms of spot, the PB powder in Rizhao Port was ¥840 per ton, golden bubba powder price was equivalent to ¥931 per ton,

【Trading Strategy】

1. On the supply side, due to the completion of some port berth maintenance, the overall delivery volume of iron ore in Australian and Brazil increased. Australia’s performance is strong, and the volume of shipments are much higher than the same period and remains at a high level. The shipments in Brazil are subject to large fluctuations, but the market expects its shipments to rebound. In terms of demand, the volume of dredging ports has decreased, the average daily iron ore output has fallen from the high level, and the daily consumption of imported iron ore has decreased. The environmental protection policy and limited production policy in Tangshan and Handan have been strengthened. Needs to pay attention to the implementation of the policy, and the overall iron ore demand has weakened. With the seasonal decline of steel mill production, high inventories restrict the space for rising prices of finished materials, the prices of iron ore lack strong upward momentum, and 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

Yisheng's large-scale equipment fulfilled the maintenance plan, but the TA basis 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.

Natural Rubber

RU: October 26th, 2020, the main force contract of RU01 up by 395 or 2.57% and closed at 15,745. The main force contract of JRU03 up by 18.3 or 7.88% closed at 250.4. Yunnan WF closed at 14,000 to 14,650 yuan per ton. Hainan SCRWF closed at 14,750 to 14,800 yuan per ton, the secondary standard rubber closed at 12,300 to 12,400 yuan per ton, and Thailand’s RSS3 closed at 18,800 to 19,100 yuan per ton.

NR: The main force contract of NR12 up by 485 or 4.27% and closed at 11,840. The main force contract of TF01 up by 6.2 or 3.78% closed at 170.1. the price of Qingdao rubber in USD increased. The spot or CIF of STR20 was $1,750 to $1,780 per ton. The CIF of SIR20 in November was $1730 per ton. The CIF of mixed rubber from Thailand in Feb was $1,700 per ton to $1,705 per ton.

Data from the Thai Ministry of Commerce: In September, Thailand’s latex glove exports increased by 154.9%. From January to September, the export of latex gloves increased by 61.4%. The main reason is that COVID-19 has not yet fully improved, and some markets lack confidence in importing latex gloves from China, while the markets make orders for latex gloves from Thailand scheduled to 2021. It is estimated that in November, the price of rubber will exceed 70 baht/kg

Futures Operation Advice: Yunnan has now in the countdown of the seasonal cut-off, the latex is reported to be 1,3000-13500 yuan/ton, and a premium in terms of cup lump is 2500-3000 yuan/ton, reaching the highest premium since 2014. With the gradual increase in raw material costs, the increasing in the price of tires is expected to accelerate the speed of production. But the terminal shipment speed is limited. For the main RU01 contract, it is suggested to long a slight position and set a stop loss at 15060 points. (For reference only)