Crude oil

German and France announced quarantine measures, oil prices fell again

Yesterday, German and France announced the resumption of new social distancing measures. France announced that the home quarantine order will begin in November for a period of one month. French officials will assess the impact of epidemic every two weeks in the future. If the epidemic eases by then, the resections may be appropriately released; otherwise, the resections will be further strengthened. German announced that it will close bars and restaurants, and the local blockade last for one month. At present, the number of infections in Europe has increased. Although the death is low, in order to prevent an overuse on medical resources, the lockdown measures in the second quarter have been restarted. We believe that this will once again have a huge impact on European transportation, according to JBC, the restart of the lockdown in Europe will cause the demand for refined oil to drop by at least 30%. We expect that the current crude oil market will once again enter a panic mode led by the epidemic. In the future, we need to pay attention to whether OPEC will make response measures such as reducing production.

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 28th, 2020, the position on I2101 contract decreased by 10426 and closed at ¥776.0 per ton, the position on I2105 contract increased by 4776 and closed at ¥721.0 per ton.

【Important Information】

1. Mysteel: Russia's Novolipetsk Group (NLMK) released a report on the production and sales of steel and iron ore for the third quarter of 2020. The report shows that in terms of output: in the third quarter of 2020, the total iron ore output was 4.11 million tons, a decrease of 15% from the previous quarter, a year-on-year decrease of 15%. In terms of varieties, the output of iron ore pellets is 1.47 million tons, fine powder 2.38 million tons, and sintered ore 260,000 tons. In terms of sales volume: NLMK's iron ore sales volume in the third quarter was 4.11 million tons, down by 16% month-on-month and 14% year-on-year. In terms of steel production and sales: the steel production in the third quarter was unchanged from the previous quarter at 4.17 million tons, a year-on-year increase of 7%. Sales volume was 4.44 million tons, an increase of 2% month-on-month and 11% year-on-year.

2. On October 28th, 2020, Canadian mining company Champion Iron released its financial and operating report for the third quarter of 2020 (corresponding to the fiscal year Q2 2021). The report shows: in terms of output: in the third quarter of 2020, the output of refined powder reached 2,268,800 tons (wet ton), a year-on-year increase of 3.6%. Sales volume: In the third quarter of 2020, the sales volume of fine iron powder reached 2.0634 million tons (dry tons), an increase of 10.9% year-on-year;

3. In terms of spot, the PB powder in Rizhao Port was ¥855 per ton, BRBF price is equivalent to 896 yuan per ton as warehouse receipt, the best delivery Karara price is equivalent to 721 yuan per ton as warehouse receipt

【Trading Strategy】

1. In terms of supply, some iron ore shipping berths in Australia and Brazil are under the maintenance. It will affect about 1.5 million tons of shipping volume in Australia, while the Brazilian shipping impact is relatively small. The number of shipments were generally stable and increased. The shipment number in Australia performed strongly, 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 demand has been suppressed under the pressure of limited production during the heating season, and the downstream steel mill industries are not willing to restock, 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

The overhaul of the two TA devices is over. The basis remains weak

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 28th, 2020, the most actively traded contract of RU01 down by 185 or 1.12% and closed at 16,350. The most actively traded contract of JRU03 up by 20.0 or 7.81% closed at 276.0. Yunnan WF closed at 15,150 to 15,500 yuan per ton. Hainan SCRWF closed at 15,600 to 15,700 yuan per ton, the secondary standard rubber closed at 12,600 to 12,700 yuan per ton, and Thailand’s RSS3 closed at 20,000 yuan per ton.

NR: The most actively traded contract of NR12 down by 450 or 3.71% and closed at 11,695. The most actively traded contract of TF01 up by 8.3 or 4.82% closed at 180.5. the price of Qingdao rubber in USD increased by $50 to $100 per ton. The spot or CIF of STR20 was $1,840 to $1,850 per ton. The CIF of SIR20 in November was $1790 per ton. The CIF of mixed rubber from Thailand in Feb was $1,795 per ton to $1,800 per ton.

The announcement from Shanghai Futures Exchange: All relevant units: After research and discussion, the decision is made, starting from the close of market settlement on October 30th, 2020 (Friday), the trading margin ratio and price limit will be adjusted as follows: natural rubber futures contract trading margin ratio is adjusted to 10%, the price limit is adjusted to 8%; if the above-mentioned trading margin ratio and price limit are different from the currently implemented trading margin ratio and price limit, the higher ratio and larger range of the two will be implemented. Other matters concerning trading margin and price limit shall be implemented in accordance with the "Shanghai Futures Exchange Risk Control Management Measures." Recently, the global situation is complex and changeable, and there are many uncertain factors that affect the operation of the market. The price of rubber products in domestic and oversea fluctuates greatly. All relevant units are requested to pay attention in risk prevention and rational investment to maintain the smooth operation of the market.

Futures Operation Advice: Recently, it coincides with the Holy Scriptures in Indonesia, India, and Malaysia, and the King of Cambodia ascended the throne. The above markets are closed. The volume of rainfall in Thailand is normal, and the moderate to heavy rains have been observed in all major production provinces. Downstream tire market has increased the price, and the existing brands have announced their second round of price increasing plans. For the most actively traded contract of RU01, it is suggested to long a slight position and pay attention to the high pressure in the market. (For reference only)