Crude oil

Crude oil: Demand recovery accelerates, crude oil shifts upward

Fundamental trends: The balance sheet of the three major institutions shows that the Call on OPEC in the first quarter of next year will be around 27 million barrels/day, and OPEC’s production restriction meeting decided that the monthly growth rate in the first quarter will not exceed 500,000 barrels/day, so we predict that OPEC's output is expected to be roughly 26 to 26.5 million barrels per day in the first quarter, and the global supply and demand gap still exists, about 500,000 to 1 million barrels per day. Looking forward in the second quarter, if OPEC chooses to target demand, supply and demand will maintain a tight balance. Or go to the library slightly. Therefore, we expect the crude oil market to maintain a small supply and demand gap in the whole year of next year, and gradually digest the inventory. At present, the offshore crude oil inventory has been destocked. If the destocking is smooth, we expect that the destocking of inventory next year will be mainly reflected in the onshore OECD. In terms of oil inventories, US oil inventories account for a larger proportion. Therefore, we believe that EIA’s oil inventories will become the best high-frequency indicator for observing whether the fundamentals are healthy next year. OPEC is also likely to follow OECD oil Inventory to adjust its own production restriction policy.

Strategy: Unilateral tends to be long-positioned, consider buying near-term and selling long-term positive sets, such as hold the position on 2102 contracts and short position on 2107 contracts

Risk: The return of Iranian and Venezuelan oil to the market was earlier than expected, the listing of vaccines was restricted, and demand growth was less than expected.

Iron Ore

On December 4, 2020, the position on I2101 contract decreased by 26,600 and closed at ¥982.5 per ton, the position on I2105 contract increased by 31,200 and closed at ¥961.0 per ton, the spread of Iron 1-5 contract is 66.5. the spread of Iron 5-9 contract is 67. In terms of spot, the PB powder in Rizhao Port was ¥935 per ton. No transactions on BRBF in Rizhao Port, the previous the warehouse discounted receipt was ¥983 per ton, the price of Karrara in Rizhao Port was ¥960 per ton.

【Important News】

1.Mysteel: According to news on the official Weibo of Dalian Commodity Exchange on December 6, implementing the "zero tolerance" requirement, the exchange has recently launched a "five-in-one" supervisory coordination mechanism for iron ore and other varieties in order to give provide the supervisory force and strict investigation for the market transactions, and severely crack down on illegal transactions.

2.Mysteel: Last week, the stock of imported iron ore was 124.46 million tons in 45 ports, a drop of 1.58 million tons from last week; the average daily port volume was 3,191,100 tons, a drop of 22,200 tons.
3.Mysteel: Last week: the operating rate of 247 steel mills blast furnaces was 85.42%, down by 0.91% from last week, down by 0.26% from the same period last year; blast furnace ironmaking capacity utilization rate was 92.40%, down by 0.07% from the previous month, up by 5.21% year-on-year; steel mills The profit rate was 92.64%, the same month-on-month, and a year-on-year decrease of 2.16%; the average daily molten iron output was 2,459,500 tons, a month-on-month decrease of 0.19 million tons, an increase of 138,700 tons year-on-year.

4.Mysteel: Last week, the average operating rate of 71 electric arc furnace steel plants was 67.19%, an increase of 0.78% from last week and a decrease of 7.05% from last year.

【Important News】

1. Last week, the iron ore inventories in 45 ports fell by 159 million to 124.47 million tons, of which Australian mines fell sharply, while Brazilian mines slowed down; in terms of varieties, lump ore, pellets, and fines all fell; except PB powder, the rest of varieties all destocked. On the demand side, the average daily dredging of ports has slightly decreased; the average daily molten iron output decreased by 18000 to 2,459,500 tons. The profit of the steel mills was good, and the molten iron remained at a high level, which supported the price, but the price increase was limited by the warehouse receipt. Karrara warehouse discounted receipt is 950 yuan/ton, BRBF discounted warehouse receipt is 980 yuan/ton. At present, the discount 01 spot is not large, the market prices increased too fast which increase the premium price for the warehouse receipt. it is suggested to hold the short 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: PX production pressure still exists, PX processing profit is difficult to rebound significantly

We expect that there is an expectation of rigid accumulation December.

In terms of the unilateral strategy, it is advised to be cautions; Basis: there is a risk-free arbitrage opportunity, long spot and short TA01. For the strategy across varieties, it is suggested to hold the current position. For the strategy across the period, reverse arbitrage opportunity is ready. For the risk, TA’s new production capacity meet the expectation; 2021 vaccine research and development situation corresponding to the progress of clothing demand rebound; upstream raw material PX production progress; polyester new production capacity meets the expectation.

Natural Rubber

Rubber: With the gradual recovery of overseas demand, the structural market is still worth to looking forward to.

According to the latest annual new planting area announced by ANRPC, the planting area declined in 2014, which corresponds to the decrease in the newly harvested area in 2021. However, the peak tapping season of the newly planted rubber trees in 2012 will continue to 2021. Therefore, the supply will continue to increase in 2021. According to the calculation of the newly added planting area in 2014, the output is expected to increase by about 470,000 tons, a growth rate of about 3%, and the growth rate will decrease from the previous month.

In 2021, the domestic inventory structure may be transformed. With the recovery of overseas demand, the demand for dark rubber will continue to increase, especially after the end of high production overseas in January next year, the new supply will decrease. A continuous process of destocking. As for light rubber, because of its profit advantage, the upstream output will rely on it next year. Once the overseas Covid-19 situation improves, the slowdown in glove demand and the increase in the production capacity of cyanide rubber will alleviate the problem of raw material squeeze, and after reopening in domestic and overseas, the tight supply problem will be gradually alleviated, or there will be a process of accumulation. At the beginning of 2021, we still need to pay attention to the issue of raw material distribution. At what point can it be rebalanced, or can it bring about a turning point in the market. Due to the domestic shutdown period at the end of December, it mainly depends on the latex supply of nearing countries. At present, Vietnam has basically entered the off-season at the end of the year, and Myanmar, Laos, including Vietnam, Malaysia and other countries are affected by Covid-19, and the pace of port supply has been somewhat restrained. It is expected that the problem of insufficient delivery products may need to be solved until the next cutting season, that is, early 2021 or it may be better resolved. Pay attention to the time period on the supply side at the beginning of 2021. If the demand recovery is good, prices will still perform well. As the peak season approaches in the second half of the year, it will mainly depend on the strength of overseas demand recovery. The optimized price may be in the first half of next year.

Strategy: Be caution, focus on production release in the second half of the year

Risk: Inventory is heavily accumulated, the weather condition improves and the production is released in large quantities, and the demand continues to weaken.

Copper

LME copper prices fluctuated and closed at US$7,774/ton, down by US$99.5/ton, an increase of 1.3%, and increase from 2170 lots to 311,000 lots

【Important Information】

1. In the United States, non-agricultural employment increased by 245,000 in November, far below the median estimate of 460,000 by economists, indicating that Covid-19 is destroying the employment. Biden said the November employment report is "severe", indicating that Congress should pass a new relief program ASAP.

2. The Speaker of the House of Representatives Pelosi believes that the negotiation of the fiscal stimulus package is gaining momentum, but the Republicans are dissatisfied with part of the bipartisan proposal with a size of US$908 billion.

3. According to SMM research, the overall order of copper companies has improved recently, the rods for enameled wires have remained stable, and the amount of rods used for cables has also recovered. Due to the limited supply of domestic copper scrap, the price of copper scrap rose during the period of rapid copper price increase, and the supply of recycled copper rods was limited Scrap copper rods lost the advantage of the price difference with refined copper rods. Cable manufacturers prefer to switch to refined copper rods, thus driving sales of refined copper rods increase. However, the downstream procurement is still suppressed by high copper prices. Some companies have reported that copper prices have been high in the past two weeks, and the speed that the downstream cable companies to buy the goods is low. However, with the increase in the import of recycled copper in the later period, the shortage of copper scrap is expected to ease. Recently, a lot of recycled copper has arrived at the port of Guangdong waiting for customs clearance, but the speed of customs clearance is slow, and it is expected that it will not flow into the market in large quantities at once. We have also learned from recycled copper rod companies that the recycled copper ordered at the beginning of the month is expected to arrive in the middle of the month. The tension in scrap copper will be significantly eased in late December, and the price difference of refined copper rods is expected to expand.

【Trading Strategy】

1. After the recent increase in LME copper price, most of the expectations for stimulus policies and vaccines have been reflected in the market. In December, consumption has begun to slow down, and China is in a state of accumulating. This round of increase on the copper price may end soon, and it is suggested to close the previous position.

2. Arbitrage: The spread of CU12-1 is narrowed to over 10 yuan/ton, hold the long position in the market.

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