Crude oil

The uncertainty in U.S. elections increases, oil prices fall slightly

The uncertainty of the U.S. election has increased sharply. Trump has reacted fiercely to the sharp reversal of the election situation. He has initiated lawsuits in several states to abolish mailed ballots received after election day. If Trump sues the U.S. Supreme Court on election procedures and fairness, the final result may be protracted and will suppress the performance of risky assets including crude oil. Even if Biden is elected, since the Senate is still controlled by the Republicans, therefore even the Democratic wins, the impact of fiscal stimulus the economy is small (may be between US$500-800 billion instead of the previous 2 trillion). The short-term economy growth, inflation, the dollar index, and U.S. bond interest rates are also relatively low. For crude oil, demand growth is relatively weak. From a medium-term perspective, Biden’s victory in the election has a high probability of increasing Iran’s production capacity. This will have a bearish impact on oil prices.

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. U.S. election results cannot be determined

Iron Ore

On November 5, 2020, the position on I2101 contract decreased by 2901 and closed at ¥791.0 per ton, the position on I2105 contract decreased by 1304 and closed at ¥728.0 per ton, the spread of Iron 1-5 contract is 63. In terms of spot, the PB powder in Qingdao Port was ¥840 per ton, the PB powder in Rizhao Port was ¥800 per ton, BRBF price was equivalent to ¥902 per ton, the best delivery Karara was equivalent to ¥854 per ton

The PB powder in Shandong Port was ¥850 per ton,

【Important Information】

1. According to the media reports: The recent data released by the Brazilian Ministry of Economy shows that Brazil’s iron ore exports in October decreased by 8.6% from the same period last year, and decreased by 17.6% from September. In October, Brazil exported 31.19 million tons of iron ore, 34.14 million tons in the same period last year and 37.86 million tons last month.

2. SMM: November 5th: Brazilian state-owned company Santa Catarina which is the operator of the southern port of Imbituba, said it plans to export about 400,000 tons of iron ore in the next five months. The port has shipped the first iron ore cargo with a loading capacity of 41,400 tons on November 1.

【Trading Strategy】

1. Arbitrage: The port inventory continued to accumulate. Steel industries are cautious in purchasing, and the overall iron ore supply exceeds demand. The shipments from Australia and Brazil have increased month-on-month, and there is pressure on the spot in the later stage. In terms of valuation, the price of Karara is around ¥850. After the discount is repaired, the upward momentum is weak. On the futures side, iron ore is still suitable for short position in the black sector. At present, the demand is good, molten iron output is not decreasing, and the stock-to-sales ratio is still relatively low, the spot price fell slowly. In the short term, it is 01 iron ore will stay in the range between 750-800, if it falls below this range, we have to see the production decrease on molten iron production.

2. Option strategy: It is advised to hold the short position on i2101-C-870. (For reference only)

PTA

PTA: The operating rate of textile industry dropped slightly from a high level, and polyester production and sales continued to be 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

Rubber: The volume of production has recovered and the price of raw material continue to decline

On November 5, the main RU contract closed at 15,010 (+165) yuan/ton, the price of mixed rubber was 11,600 (0) yuan/ton, the basis of main contract was -1160 yuan/ton (-115); the open interest of top 20 main long positions was 96,863 (-3426) lots, the open interest of top 20 main short position 129,238 (-71) lots, and the net short position was 32,375 (+3355).

On November 5, the main NR closing price of NR contract closed at 10,475 (-105) yuan/ton, the STR in Qingdao Free Trade Zone was 1,600 (+15) US dollars/ton, the SMR was 1,600 (+5) US dollars/ton, and the SIR was 1,550 (-20) US dollars/ton. The basis of main contract was -106 (-10) yuan/ton.

As of October 30: the total inventory of the exchange was 247,910 (+3985) lots, and the warehouse receipts of exchange were 221,030 (-490) lots.

Raw materials: sheet rubber 59.6 (-5.7), cup lump 38.45 (-0.40), latex 52.7 (-5.3), RSS3 61.37 (-5).

As of October 29, the domestic all-steel tire operating rate was 75.3% (-0.02%), and the domestic semi-steel tire operating rate was 71.01% (+0.2%).

Viewpoint: Yesterday, the price of overseas raw materials maintained a significant decline, especially for latex, the reason is related to the increase in the attractiveness of raw material prices, which boosted the enthusiasm for rubber tapping. At the same time, after the price fell, the spot market's mentality of buying up and not buying down also boosted raw material prices fell further. At present, the price of latex and cup latex in Thailand have basically fallen to the same level in 2016, but it is still higher than other years. The price of latex in Yunnan is still at a high level, and the profit is good. The overall spot market has turned from pre-crazy to rationality. Last week, downstream purchases rebounded, result a slight decline in Qingdao port inventory from the previous month. We suggest to mainly focus on the recovery of production and the fluctuation of raw material prices in the production area. In the short-term, rubber prices may maintain an adjustment trend, we need to see the new drivers of supply and demand fundamental factors.

Strategy: Neutral

Risks: a substantial increase in production, continued accumulation of inventories, a substantial decrease in demand, etc.