Crude oil

Crude oil: The limited production alliance has not yet reached an agreement, and the overseas epidemic has intensified
Yesterday, the oil prices rose first and then fell. We believe that there are two factors that dominated this trend. On the one hand, there are different opinions between the production-limiting alliances. Countries led by Saudi Arabia recommend not to increase production in February, while Russia insists on increasing production by 500,000 barrels per day, although 500,000 barrel/day has a limited impact on market supply and demand, but this reflects the internal divergence of the limited production alliance. Saudi Arabia tends to focus on the dynamic balance strategy of demand, while Russia tends to increase production and expand market share in a higher price environment. We believe that in the first quarter the production restriction alliance as a whole is still discussing within the December production restriction framework. Even if the differences have little impact on the market, it will bring greater uncertainty to the production restriction policy after March. On the other hand, the overseas epidemic situation has deteriorated significantly. The number of new infections in the United States has reached 300,000. The United Kingdom has imposed a blockade across the country. Overseas liquidity continues to freeze and the demand recovery has been delayed. The decline in gasoline yesterday was significantly larger than that of crude oil. The weak demand caused by the epidemic is the reason that current market is bearish.
Strategy: Be neutral or hold the current position.

Risk: No (For reference only)

Iron Ore
Iron Ore

The position on I2101 contract decreased by 12 and closed at ¥1100.5 per ton, the position on I2105 contract decreased by 10300 and closed at ¥1036.5 per ton, the spread of Iron 1-5 contract is 64, the spread of Iron 5-9 contract is 70. In terms of spot, the PB powder in Rizhao Port was ¥1,100 per ton. The price of Karara in Rizhao Port was ¥1175 per ton, the discounted warehouse price was ¥1185 per ton, the price of mixed powder warehouse receipt was ¥1150 per ton.

【Important News】

1. Mysteel: Indian national mining company NMDC announced on January 1 that the output of iron ore NMDC in December 2020 increased by more than 23%, year-on-year to 3.86 million tons. NMDC stated in the BSE document that in the same period last year, the miner produced 3.13 million tons of iron ore from its mines. The company's total sales volume in the month under review was 3.62 million tons, an increase of 19% from the 3.04 million tons in December 2019.
2. Mysteel: China’s 45 ports reached 22.431 million tons, an increase of 108,000 tons from the previous month, the six northern ports totaled 10.117 million tons, an increase of 582,000 tons from the previous month. The total arrival volume of China's 26 ports was 2132.6 tons, an increase of 98,000 tons from the previous month.

【Trading strategy】

1. At present, the total iron ore port inventory is 12416 million tons, a slight increase of about 70,000 tons from last week. In terms of weight volume, Australian mines have increased while Brazilian mines have decreased. In terms of varieties, the coarse powder continued to accumulated, while the remaining varieties fell. In terms of shipments, Australia and Brazil have no plans for large-scale overhauls this week and the overall shipment volume has not changed much. Based on the previous shipment volumes, it is expected that arrivals at ports will increase. On the demand side, due to the large-scale drop in temperature, steel mills and ports have reduced the cargo. The daily average dredging of the port has dropped a lot, the average daily molten iron output slightly increased by 0.56 to 245.10 and the steel mill production volume is still acceptable, the blast furnace production and maintenance are both resumed this week and it is expected that the molten iron output will not change much in the future and the iron ore inventory may continue the previous trend. In the short term, t It is expected that the iron ore will follow the material fluctuation and become weak. In the short term, it is suggested to pay attention to the market price adjustment and pay attention to the level below 975. (for reference only)

PTA

PTA: PTA continues to increase in the cost and the polyester production and sales increase
Gradually enter the seasonal accumulation period from January to February. In terms of the unilateral strategy, it is advised to be cautions due to covid-19. For the strategy across the period, arbitrage opportunity is ready. For the risk, there will be a decrease on the rate of polyester before the spring festival.

Natural Rubber
Rubber: Disturbance on the supply side, rubber prices increased again
On Jan 4, the most active traded RU contract closed at 14,245 (+345) yuan/ton, the price of mixed rubber was 11,750 (+300) yuan/ton, the basis of most active traded contract was -645 yuan/ton (-120); the open interest of top 20 active traded long positions was 94,918 (-3626) lots, the open interest of top 20 active traded short position 138,641 (-1432) lots, and the net short position was 43,723 (+2194).

On Jan 4, the most active traded NR contract closed at 10,660 (+350) yuan/ton, the STR in Qingdao Free Trade Zone was 1,625 (+60) US dollars/ton, the SMR was 1,605 (+77.5) US dollars/ton, and the SIR was 1,575 (-70) US dollars/ton. The basis of most active traded contract was -358 (+132) yuan/ton.

As of December 31: the total inventory of the exchange was 172,862 (+2042) lots, and the warehouse receipts of exchange were 160,570 (+1899) lots. Raw materials: sheet rubber 56.69 (0.), cup lump 37 (-0.25), latex 48.5 (-0.5), RSS3 59.16 (-1.36).

As of December 31, the domestic all-steel tire operating rate was 54.89% (-2.16%), and the domestic semi-steel tire operating rate was 54.91% (-2.07%).

Viewpoint: Yesterday, due to the active market atmosphere and the upcoming rain in Thailand’s main production areas, the rubber prices increased again. In the early stage, due to the tightening of domestic environmental protection, the operating rate of tire factories fell sharply. The weather in Shandong has improved, which may bring the operating rate this week to rise again, but because exports are still restricted, the rebound is expected to be limited. Yesterday NR performed more strongly. One reason was the support of fundamentals, and the other was the news yesterday that the domestic standard rubber customs clearance was restricted, and the short-term support for NR was stronger. The overall supply and demand showed an improvement from the previous month and the price of rubber is expected to maintain strong fluctuations.
Strategy: Neutral

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

Copper

Copper

LME copper prices fluctuated and closed at $7856/ton, up by $102.5/ton, an increase of 1.32%, and decreased 3420 lots to 308,000 lots

【Important Information】

1. [Georgia federal senator decides to seize control of the Senate] On the Jan 5th local time, the two Senate seats in Georgia will hold a second round of voting. The result of the election will determine the control of the Senate and is more related to the designate. Will President Biden be able to govern smoothly in the next four years? In this election, two Democratic candidates will challenge two current Republican senators. If the Republican Party wins one seat in the election, it can retain control of the Senate, but if the Democrats take two seats, the two parties will have a 50-50 situation, and Vice President-elect Harris can cast a decisive vote at a critical moment. This means that the Democratic Party controls both houses of Congress and the White House.
2. British Prime Minister Johnson announced a lockdown across England] British Prime Minister Johnson announced a lockdown across England from Monday evening to mid-February to prevent the surge due to Covid-19 cases which will overwhelming the national medical system. Johnson said in a speech that all elementary schools, middle schools and universities will be closed from Tuesday, except for the children of vulnerable children and those of workers in key positions. Johnson said that people can only leave their homes under certain circumstances and all non-essential retail stores, hotels and personal care services must continue to close. The new restrictions will soon become law and people will need to comply with them from Monday night.
【Trading Strategy】

1. LME copper prices rose then fell. The market is still more cautious about the upcoming Senate election. At present, the Republican Party may have a larger advantage. If the Republican Party controls the Senate, it will hinder the further promotion of subsequent stimulus policies and suppress market sentiment. From a spot point of view, copper has entered the off-season for consumption. Some large wire and cable manufacturers have reported that orders have dropped by about 20%. The imported copper scrap has increased and gradually flowed into the country. The fundamentals have weakened. Copper price is expected to remain volatile in the short term.

2. Arbitrage: Hold the current position.

3.Options: Short on cross-market options, CU2102-C-60000, CU2102-P-54000. (For reference only)