Crude oil

Crude oil: OPEC decided to gradually resume production

Yesterday's OPEC meeting decided to gradually increase production by 2.11 million barrels per day from May to July, and Saudi Arabia's voluntary production cuts will also be gradually cancelled. Since the increase in global demand from Q2 to Q3 will reach 3 to 4 million barrels per day from the previous month, the increased crude oil production can be absorbed by the market. We believe that the reason why OPEC decided to increase production at this meeting is that on the one hand, it is in response to global demand growth. In particular, the United States and India have recently had greater opinions on OPEC’s artificial limit on production and price protection; on the other hand, it has taken into account the interests of various countries. Increased production in Russia and Kazakhstan triggered dissatisfaction among some OPEC members. It can be seen that OPEC is also constantly optimizing its production reduction strategy to balance the interests of all parties, but we believe that OPEC's goal is still to reduce oil inventories within a controllable price range. Therefore, OPEC must maintain a certain gap in the crude oil balance sheet. If there is another mismatch between supply and demand, it is not ruled out that OPEC will reduce production again. Therefore, the current production policy of OPEC has greater flexibility and still maintains a more cautious order for increasing production.

Strategy: Neutral, none

Risk: None

Iron Ore

Iron Ore

The position on I2105 contract closed at ¥1096.5 per ton, i2109 closed at ¥964 per ton, the spread of Iron 5-9 contract is 132.5 yuan.

In terms of spot, the PB powder in Rizhao Port was ¥1,125 per ton, up by 13 yuan, the discounted SSF price was ¥1168 per ton.

【Important News】

1. Mysteel: According to statistics this week, the total iron ore inventory of 45 ports in China was 131,329,900 tons, an increase of 668,000 tons on a week-on-week basis. The average daily port volume was 2,937,800 tons, and a decrease of 127,600 tons on a week-on-week basis. At present, there are 102 ships in Hong Kong and 5 ships. The average daily output of molten iron was 2.3137 million tons, a decrease of 36,800 tons from the previous week.

2. Mysteel: 69 out of 126 blast furnaces in Tangshan area were overhauled this week, with a total volume of 59586m³; the weekly output was about 1.2132 million tons, and the capacity utilization rate was 58.52%, down 1.19% from last week, and down 16.87 from the same period last month. %, a decrease of 21.92% from the same period last year.

【Trading Strategy】

1. This week, the total iron ore inventory of 45 ports was 131.32 million tons, a slight increase on a week-on-week basis. In terms of varieties, lump ore and pellets entered the state of de-stocking again, and iron fine powder and coarse powder continued to accumulate. Shipments from Australia have increased significantly in the new phase, while shipments from Brazil are basically stable. On the demand side, due to the actual implementation of environmental protection production restrictions and the spread of production restrictions, at the same time, some blast furnace maintenance after the end of the heating season is superimposed. The average daily molten iron output dropped by 37,000 to 2.31 million tons, the average daily dredging port dropped by 12 to 2.93 million tons, and the number of port pressure vessels decreased by 5. On the whole, as the arrival of iron ore increased, and the demand was suppressed by overhauls and administrative restrictions on production, the port inventory was slightly accumulated. Recently, the transaction and delivery of finished products are good, and there is no obvious trend of marginal weakness; steel mills are more enthusiastic about production under the condition of considerable profits, and tend to purchase high-grade mines. At present, the driving force of iron ore is not obvious, and the market mentality gradually stabilized after the production limit reached expectations. The market rebounded after a sharp decline; if there is no policy reduction, there is still the possibility of upward repair discounts, but under the medium and long-term Ministry of Industry and Information Technology's policy of reducing crude steel production, it is difficult for molten iron to increase significantly. In the short term, it is expected to be mainly volatile.

2. Arbitrage: long thread or hot coil and short iron ore

(For reference only)

PTA

PTA: Processing fees rebounded slightly, polyester production and sales declined again

Balance sheet outlook: TA maintenance is still concentrated in April, and TA processing fees are expected to bottom out; however, PX is slightly accumulated in April, and PX processing fees are consolidating.

Strategic recommendations: (1) Unilateral: hold the current position. (2) Intertemporal: hold the current position.

Risks: The implementation of the PTA plant maintenance plan in April, and the sustainability of the improvement of the supply and demand of aromatics due to the gasoline premium.

Natural Rubber

Rubber: Heavy truck sales continue to pick up, and rubber prices rebound from low levels

On April 1st, the most active traded RU contract closed at 13,850 (+155) yuan/ton, the price of mixed rubber was 12,300 (+150) yuan/ton, the basis of most active traded contract was -385 yuan/ton (-30); the open interest of top 20 active traded long positions was 40976 (-7279) lots and the short position was 60599(-9357), net short position was 19623(-2078).

On April 1st, the most active traded NR contract closed at 11,070(+180) yuan/ton, the STR in Qingdao Free Trade Zone was 1,695 (+10) US dollars/ton, the SMR was 1,655 (+10) US dollars/ton, and the SIR was 1635 (+5) US dollars/ton. The basis of most active traded contract was -347 (-168) yuan/ton.

As of Mar 26th, the total inventory of the exchange was 175,902 (+900) lots, and the warehouse receipts of exchange were 170,920 (+300) lots.

Raw materials: sheet rubber 61.5 (0), cup lump 43.5 (0), latex 62.2(-0.3), RSS3 62 (-0.27).

As of Mar 25, the domestic all-steel tire operating rate was 78.03% (+0.34%), and the domestic semi-steel tire operating rate was 73.36% (+0.35%).

Opinion: The futures prices rebounded slightly yesterday. According to the preliminary statistics of First Commercial Vehicle, the domestic heavy truck market is expected to sell about 220,000 vehicles of various types in March, a substantial increase of 86% month-on-month and 83% year-on-year. The continued recovery of heavy trucks is mainly due to the approaching downstream peak season and the imminent implementation of the National VI emission regulations for heavy diesel vehicles from July 1 this year, which will bring about a significant increase in demand for updates. It is expected that the sales of heavy trucks will perform well in the first half of this year. The fundamentals have not changed significantly. With the weakening of the market atmosphere, domestic delivery is approaching. Based on the increase in output, the delivery pressure of the Shanghai Rubber 05 contract has appeared. If the domestic production volume is increased in the later period, the disk will still be under pressure. The downstream demand is acceptable. It is recommended to hold the current position for the time being and wait for new drivers.

Strategy: Neutral

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

Copper

Copper

Yesterday, LME copper closed at US$8805/ton, down by US$4.5/ton, a decrease of 0.05%, and decreased 6609 lots to 30,4000 lots.

【Important News】

1. The President of the St. Louis Federal Reserve stated that inflation looks set to rise in the next year or so, and the Fed is happy to see the inflation rate slightly higher than 2%. The President of the San Francisco Federal Reserve stated that the Federal Reserve will maintain accommodative policies and will not achieve either of the two goals of inflation and employment in 2021. Adam Posen, director of the Peterson Institute, a well-known think tank, believes that the Fed will be forced to raise interest rates in advance in December 2022 or January 2023, even if they adopt a new wait-and-see strategy on inflation.

2. Workers at the Radomiro Tomic copper mine under Chile's state-owned copper giant Codelco accepted the company's new contract on Wednesday, alleviating concerns about a possible strike. The union said in a statement that the contract proposal was approved. He added that there were many votes in support of the strike, but the required absolute majority had not yet been reached.

【Trading Strategy】

1. The recent increase in external risks is due to the rebound in U.S. bond yields. On the other hand, Biden's infrastructure stimulus policies are somewhat less than expected, and the source of funds is in the form of tax increases, and market risk sentiment has declined. However, nearing the peak consumption season, the current inventory is still at a relatively low level, and the downstream raw material inventory is also low. Copper prices may remain volatile for the time being. Pay attention to the support in the 64000-65000 yuan/ton area.

2. Arbitrage: At present, copper consumption has not fully recovered. Real estate, infrastructure and other orders are relatively weak. High copper prices have also inhibited some copper consumption. The supply of copper scrap is abundant. The downstream favors copper scrap is relatively strong. Copper is still in storage. At this stage, the peak season may not arrive until mid-April, and the arbitrage is temporarily to hold the current position.

3. Options: continue to hold put options, that is, sell CU2105-P-60000

(For reference only)