Crude oil

Iraqi officials criticize OPEC for delaying production increase

The U.S. market was closed on Thanksgiving Day yesterday. According to the statement of Iraqi officials (not the oil minister), Iraq has a strong willingness to increase production and increase the country’s oil revenue. Recently, OPEC has different opinions. Iraq and the UAE hoped that the production can be increased as scheduled in the future. The current constraints on the production-restriction alliance are mainly due to Saudi price. The reason for the high compliance rate is that the member states do not want to return to the price war in the second quarter, but according to the previous OPEC production plan, an increase in production by 2 million barrels per day in January is also a reasonable request in the plan. Therefore, the meeting at the end of the month still depends on the attitudes of Saudi Arabia and Russia. We believe that from the OPEC perspective, they do not want oil prices to rise above US$50 per barrel then the United States and other non-OPEC oil-producing countries restore supplies.

Strategy: Be caution.

Risk: OPEC increases production as scheduled, and Covid-19 leads to a second lockdown

in U.S.

Iron Ore

On November 26, 2020, the position on I2101 contract increased by 4367 and closed at ¥904.0 per ton, the position on I2105 contract increased by 141,000 and closed at ¥834.5 per ton, the spread of Iron 1-5 contract is 69.5. the spread of Iron 5-9 contract is 53.5. In terms of spot, the PB powder in Rizhao Port was ¥883 per ton, BRBF in Qingdao Port was ¥890 per ton, warehouse receipt equivalent to ¥929 per ton, Karrara in Rizhao Port was ¥925 per ton.

【Important Information】

1. Mysteel: According to the media reports, FIMI, the Federation of Indian Mineral Industries, appealed to the government for a total ban on the export of iron ore pellets, which will help meet India's domestic steel demand first. FIMI claims that the iron ore shortage in Indian steel industry is human-made. If the government immediately bans the export of iron ore pellets, including not allow private companies to export pellets, this will help meet the domestic demand.

【Trading Strategy】

The latest data shows that the total inventory of imported iron ore from 45 ports this week fell by 1.46 million tons from the previous month, it shows an increasing trend compared with the previous drop. In terms of different varieties, the inventory of all varieties decreased, among them, the lump ore decreased significantly. On the demand side, the average daily port dredging dropped slightly, but still remained at a high level; the average daily molten iron output increased by 2.21 to 2,461,300 tons. The current profit of the steel plant is relatively good, and the molten iron does not fall but increases, which is good for the price formation, but the price increase is limited by the warehouse receipt, Karrara discount warehouse receipt is 914 yuan/ton, BRBF discount warehouse receipt is 929 yuan/ton. At present, the demand is seasonally falling, scrap steel prices continue to rise, steel mills' long-term process profits may remain, and molten iron production is expected to remain at a high level. The current discount 01 spot is not large, it is suggested to hold the long position on the 05 iron ore

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

PTA

PTA: The texture demand fell again, and polyester production and sales declined.

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 hold the current position. For the risk, it is advised to focus on PTA factory inspection and fulfillment wishes, and the downstream restocking space and improvement of demand.

Natural Rubber

Rubber: Raw material prices stay strong, latex prices maintain at the current level.

On November 26, the most active traded RU contract closed at 14,575 (-160) yuan/ton, the price of mixed rubber was 11,750 (-100) yuan/ton, the basis of most active traded contract was -475 yuan/ton (+160); the open interest of top 20 active traded long positions was 51,414 (-4637) lots, the open interest of top 20 active traded short position 69,342 (-5958) lots, and the net short position was 17,928 (-1321).

On November 26, the most active traded NR contract closed at 10,690 (-10) yuan/ton, the STR in Qingdao Free Trade Zone was 1,620 (-5) US dollars/ton, the SMR was 1,595 (-10) US dollars/ton, and the SIR was 1,555 (0) US dollars/ton. The basis of most active traded contract was -396 (+80) yuan/ton.

As of November 20: the total inventory of the exchange was 142,232 (-118574) lots, and the warehouse receipts of exchange were 73,820 (-154270) lots. Raw materials: sheet rubber 61.33 (+0.43), cup lump 39.4 (+0.15), latex 53.5 (+0), RSS3 66.11 (+1.02).

As of November 19, the domestic all-steel tire operating rate was 73.52% (-1.74%), and the domestic semi-steel tire operating rate was 70.58% (-0.45%).

Viewpoint: The latex price dropped slightly yesterday, and the overall fundamentals have not changed much. When the prices of domestic and foreign raw materials stabilized, the space below the futures prices was basically restricted. This week, there were rainfalls in the main producing areas in Thailand, and raw material prices continued to rise slightly. In China, production is limited due to the production stoppage, and raw material prices are relatively strong. The rubber supply side has strong support, while the demand side shows weakness in the short term, but the positive pattern remains unchanged. It is expected that the rebound in the latex prices will continue. It is suggested to hold the long positions in the market.

Strategy: Be caution

Risk: Production has increased significantly, inventory continues to accumulate, and demand has decreased significantly.

Copper

LME copper prices increased and closed at US$7,412/ton, up by US$86/ton, an increase of 1.17%, and increase from 2177 lots to 311,000 lots

【Important Information】

1. [Cochilco: If the new expansion project does not meet the expectation, the production of Chile’s copper mines will meet severe challenges] According to the BNAmericas website, the Chilean Copper Commission (Cochilco) is worried that if new projects and mine expansion plans cannot meet the scheduled, the country’s copper production will meet severe challenges.

2. Market news: Trump said that if the Electoral College voted for Biden, he would give up power

【Trading Strategy】

1. Recently, the macro benefits are relatively concentrated. Copper prices hit a seven-year high, and there is no sign of turning down currently, and it may remain strong temporarily.

2. Arbitrage: After the spread of CU12-1 is increased to over 120 yuan/ton, hold the long position in the market.

3. Options: Hold the current position. (For reference only)