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Daily Market Review on Specified Futures Products 2020.11.11

Fang submitted 2020-11-11 14:43:17

Crude oil

Crude oil: Good news on vaccines boosted the market, oil prices continue to rise

Although the introduction of the vaccine can eliminate the uncertainty caused by Covid-19 to a certain extent (repeated lockdowns, etc.), it also brings new uncertainty. The fiscal and monetary policies of major economies may be affected by vaccines. ( the intensity of fiscal and monetary policies may be reduced), and for OPEC, the launch of vaccines has also increased the difficulty of adjusting production restriction policies. On the one hand, it is affected by the second outbreak of European and American epidemics, short-term demand is not good. The market has already expected OPEC to postpone its production increase (one quarter), but on the other hand, if the vaccine is launched at the end of the year, it may be mismatched with OPEC’s extended production restriction, which means that OPEC will lose part of its market share. We believe that OPEC may adjust its policy in the upcoming meeting, and we expect that it will delay the policy of production increase by one month or reduce the scale of production increase. We also believe that market volatility will remain at a high level in the future.

Strategy: Neutral, it is advised to long a position on back month contract 2106 and 2112

Risk: The progress of the vaccine is not as expected or other side effects

Iron Ore

On November 10, 2020, the position on I2101 contract increased by 5,142 and closed at ¥831.0 per ton, the position on I2105 contract increased by 84 and closed at ¥756.0 per ton, the spread of Iron 1-5 contract is 75.0. In terms of spot, the PB powder in Rizhao Port was ¥870 per ton, BRBF price warehouse receipt equivalent to ¥902 per ton, the price of Karara was ¥895t per ton, the best delivery Karara was equivalent to ¥885 per ton.

Important Information

1. According to the media reports, two days before the start of the CIIE, FMG signed a total of 12 memorandums of understanding with major Chinese steel companies, procurement partners and financial institutions, with a total value of approximately US$3 billion to US$4 billion. Last Friday, FMG signed a memorandum of understanding on strategic cooperation with Bank of China Sydney Branch at Shanghai National Convention and Exhibition Center. In addition, FMG has signed 9 memorandums of understanding with other Chinese steel companies and procurement partners. In addition to the iron ore supply memorandum, FMG also signed a strategic cooperation agreement on manufacturing supply with Valin Group which is the second largest shareholder of FMG.

Trading Strategy

1.Currently, the demand exceeds the expectations. Downstream continue to destock the inventory, and the destocking rate has increased compared with last week. The overall demand performance is relatively strong, which has certain support for molten iron output. In terms of valuation, the basis of iron ore began to be narrowed in November. The gap continues to decrease. it is suggested to short on 01 iron ore while long 05 iron ore for hedging.

2. Option strategy: It is advised to hold the short position on i2101-C-880 and hold the short position on i2102-P-800. (For reference only)


PTA: Under the background of price rebound in crude oil, polyester production and sales have increased significantly

We will continue to estimate the de-stocking, follow up by the implementation of the overhaul and the continuity of demand improvement. A small de-stocking can be achieved in November while there is an expectation of rigid accumulation 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: Price of raw materials needs to stabilize, and futures prices remain weak

On November 10, the most active traded RU contract closed at 13,920 (-320) yuan/ton, the price of mixed rubber was 11,325 (-50) yuan/ton, the basis of most active traded contract was -670 yuan/ton (+295); the open interest of top 20 active traded long positions was 89,749 (+877) lots, the open interest of top 20 active traded short position 113,161 (-5694) lots, and the net short position was 23,412 (-6571).

On November 10, the most active traded NR contract closed at 10,355 (+60) yuan/ton, the STR in Qingdao Free Trade Zone was 1,575 (-30) US dollars/ton, the SMR was 1,540 (-30) US dollars/ton, and the SIR was 1,550 (0) US dollars/ton. The basis of most active traded contract was -470 (+94) yuan/ton.

As of November 6: the total inventory of the exchange was 253,537 (+5627) lots, and the warehouse receipts of exchange were 225,000 (+3970) lots.

As of November 10, raw materials: sheet rubber 55.29 (-0.1), cup lump 36.95 (+0.1), latex 49.7 (-0.20), RSS3 57.76 (-0.57).

As of November 5, the domestic all-steel tire operating rate was 75.39% (+0.09%), and the domestic semi-steel tire operating rate was 71.23% (+0.22%).

Viewpoint: Rubber prices remained weak yesterday. After the strong support of raw material prices become weak, the second closure of European cities due to epidemic has weakened overseas rubber demand. The decline in actual demand and the improvement in expected demand coexist, and the gap between long and short markets has also increased. With the continued outflow of funds from the RU 01 contract, the previous strong supply returned to rationality, and along with the sharp decline in raw material prices, it also returned to rationality. At present, the decline of raw material prices in the main producing areas has slowed down, and the main focus is on the stabilization of spot prices in the later period. However, the current basis is weak, it reflects weak actual demand and we need to wait for more supporting factors to emerge.

Strategy: Neutral

Risks: Production and inventory both increased significantly, and the demand dropped.

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