Iron ore: prices hit new highs, and regulatory control is expected to become stricter
Opinion and logic:
Yesterday, the iron ore 2109 contract was significantly increased the lots, finally closing at 1,100 yuan/ton, up 3.58%, or 38 yuan/ton. Qingdao Port PB fine reported 1,235 yuan/ton, an increase of 29 yuan/ton; Qingdao Port SSF reported 985 yuan/ton, an increase of 13 yuan/ton, and the price difference between high and low quality products continued to expand by 5 yuan/ton to 250 yuan/ton. The prices of the most actively traded continuous iron hit a new high since its listing, Platts daily trading price was at a high level, and the overall performance of spot and futures prices have been relatively strong recently.
The new version of the "Implementation Measures for Capacity Replacement in the Iron and Steel Industry" has completed the stages of soliciting opinions and revisions. The final process is currently in progress. The ratio of steel capacity replacement will be significantly tightened. In the first quarter, Vale produced 68 million tons of iron ore (the market is expected to be 72 million tons), and the sales volume of iron ore was 59.3 million tons, a year-on-year increase of 15%. Rio Tinto produced 76.4 million tons of Pilbara iron ore and delivered 77.8 million tons in the first quarter, while analysts’ expectation was 77.6 million tons. The Ministry of Industry and Information Technology will carry out energy-saving supervision of key industries such as steel, and prohibit new production capacity increase of steel. The next step will be to actively take measures with relevant departments to promote the stabilization of raw material prices and prevent panic buying or stockpiling in the market. The Indian Iron and Steel Association predicts that Indian steel demand will increase by 22% to 100 million tons in 2021.
Generally speaking, domestically, due to limited production in a few cities which has not yet spread to the whole country, coupled with the peak season of steel demand and the high profits of steel mills. The Ministry of Industry and Information Technology has not yet issued a production restriction policy. As the delivery month approaches, the price of iron ore is likely to go out of the situation of repairing the basis upwards. The short-term performance of the market has been relatively strong, and it has now hit a new listing high, which has once again attracted the attention of government departments. However, with the arrival of environmental protection production limitation, the domestic iron ore balance sheet is expected to weaken. Last week, the exchange once again introduced a substantial position restriction system, and it is expected that later policy supervision and control will be tightened. In foreign countries, judging from the current ultra-high overseas steel prices, it is mainly due to the short supply of steel. At present, it is unlikely that overseas steel production capacity will increase significantly in the short term. Therefore, the demand for iron ore is unlikely to increase significantly beyond expectations. In terms of futures strategy, we recommend a combination of go long position of thread and hot coil and short position of iron ore, and in terms of options strategy, we recommend buying put options.
Unilateral: neutral in the short-term, and to bearish in the medium- and long-term
cross-species: go long position of thread or hot coil and short position of iron ore
Spot-Futures Arbitrage: None
Options: buy put options
Concerns and risks: The intensity of production restriction and limitation at thread and hot coil end is not as good as expected, the demand for thread and hot coil end is strong, and overseas pig iron production has exceeded expectations by a large margin.
Rubber: Arrivals are small, and port inventory continues to decline
On April 20th, the most active traded RU contract closed at 13,915 (+260) yuan/ton, the price of mixed rubber was 12,250 (+250) yuan/ton, the basis of most active traded contract was -640 yuan/ton (+15); the open interest of top 20 active traded long positions was 100,815 (-4149) lots and the short position was 143,850 (-3711), net short position was 43,035 (+438).
On April 20th, the most active traded NR contract closed at 11,010 (+170) yuan/ton, the STR in Qingdao Free Trade Zone was 1,695 (+25) US dollars/ton, the SMR was 1,665 (+27.5) US dollars/ton, and the SIR was 1,635 (+30) US dollars/ton. The basis of most active traded contract was -366 (+4) yuan/ton.
As of April 16th: the total inventory of the exchange was 177,602 (0) lots, and the warehouse receipts of exchange were 174,140 (+2210) lots.
Raw materials: sheet rubber 61.12 (0), cup lump 42.7 (+0.1), latex 57.5 (0), RSS3 61.3 (+0.1).
As of April 15th, the domestic all-steel tire operating rate was 76.01% (-2.3%), and the domestic semi-steel tire operating rate was 72.81% (-1.12%).
Opinion: Yesterday's futures market prices continued to rebound slightly, which was might mainly driven by crude oil prices and related commodities, including the stabilization of stock indexes. This made the market sentiment more optimistic and boosted rubber prices. The delivery has already begun in northern Thailand, and the phenological conditions of the production area are good and it is expected that later production will be released. At present, foreign countries are in the early stage of delivery and the output is small. It is expected that the price of raw materials will not fall sharply in the short term. Therefore, the support of the rubber cost side still exists. The limited domestic arrivals have also brought the latest port inventory to continue to decline slightly. The operating rate of tire factories dropped last week, and there may be concerns about short-term weakening of demand. Therefore, the supply and demand of rubber is weakly driven, and price fluctuations are expected to be the main factor.
Risks: a substantial increase in production, continued accumulation of inventory, and a substantial decrease in demand, etc.
Crude oil: API data shows decline in US gasoline inventories
API released inventory data yesterday, among which the crude oil inventories increased slightly. For refined oil, gasoline inventories decreased while distillate inventories increased. Overall, the data reflects the bullish trend for the whole market. The current fundamental data in the United States is relatively strong, especially the continuous recovery trend of downstream gasoline consumption. However, from a global perspective, China is still in a relatively weak fundamental pattern, especially the demand from local refineries still shows no signs of recovery. The current crude oil inventory in Shandong Port is still high, and some traders’ crude oil cargoes have not yet been sold, while local refineries' own plant inventory levels are also high, resulting in a decline in crude oil port congestion volume. In addition, China's diesel exports have returned to pre-epidemic levels, which has also made the Asia-Pacific region's refined oil resources loose and suppressed the profits of refinery factories. Overall, the crude oil market is still in a pattern of differentiated strong and weak regional fundamentals, and the United States is stronger than Europe and the Asia-Pacific.
Copper: There may be a certain need to purchase before May Day of China, but the current high copper price makes the transaction still sluggish
Spot market: According to SMM news, yesterday's spot market performance converged as before. Under the condition that the market remained above 69,000 yuan/ton, the downstream maintained a attitude of holding the current position, and market transactions were still relatively small. In the morning market, flat water copper began to be quoted at a discount of 130 yuan/ton, and there were few market inquiries. Some holders quickly adjusted the price to a discount of 140 yuan/ton. However, market inquirers increased, and some trade orders were lowered to a discount of 150 yuan/ton, resulting in small number of transactions were made. The supply of good copper and wet-process copper is relatively scarce, and holders have highlighted their reluctance to sell. Even if the market continues to fluctuate at a high level, the premium and discount quotations are still relatively strong. In the morning market, a small amount of ENM was reported at a discount of 100 yuan/ton. The quotations of other brands were firm at a discount of 80 to a discount of 60 yuan/ton. Guixi copper holders were the most reluctant to sell. The premium or discount was even reported to a discount of 30 yuan/ton. Buyers and sellers had large differences in prices. It is difficult to see a large number of transactions in the market. Also, it is difficult to find sources in the wet-process copper market. Brands such as UMMC, DMOOK, NORISK are quoted at a discount of 220-200 yuan/ton, which has passively become the price guide for wet-process copper.
Opinion: Yesterday, the US dollar index continued to fall within the day, while the night trading showed a certain rebound. However, copper prices are still relatively strong, and holders still have certain behaviors that are reluctant to sell, making actual transactions still relatively limited. However, the inquiry price has indeed risen from the previous day. At present, there may be a certain demand for purchases just before and downstream of May Day, which is superimposed on the current weak US dollar. Therefore, in the short term, there is still a relatively optimistic attitude towards copper prices for the time being.
In the medium and long term, macroeconomically, there is a high probability that global central banks will continue to maintain the current ultra-loose monetary and fiscal policies, and the U.S. dollar is expected to remain weak. In terms of fundamentals, the CSPT team failed to finalize the floor price of copper concentrate processing fees in the second quarter of 2021, indicating that the market may have certain differences on the future supply of copper concentrate, but it is still hard to say that it is ample. On the demand side, China’s current control of the epidemic is still very successful, and the new energy and new infrastructure sector will continue to drive copper demand. The probability of destocking of the inventories in the next peak season will form a strong support for copper prices. We temporarily maintain the long-term bullish judgment of copper prices. However, if the destocking in the second quarter falls short of expectations, the increase in copper prices may be weaker than previously expected.
1. Unilateral: cautiously bullish 2. Inter-market: postpone 3. Inter-period: reverse arbitrage of internal and external markets; 4. Options: postpone
1. When will the accumulation of inventories end
2. U.S. Treasury interest rate changes
3. The U.S. dollar index rebounded highly
4. Second quarter demand fell short of expectations
PTA: PX continues to be strong and to promote cost-driven PTA price increases
Balance sheet outlook: TA will continue to de-stock in April as expected, and TA processing fees are expected to bottom out; however, PX has accumulated slightly in April, and demand for oil adjustments has prompted PX to strengthen beyond expectations.
Strategic recommendations: (1) Unilateral: cautiously bullish. (2) Intertemporal: hold the current position.
Risks: The implementation of the PTA plant maintenance plan in April, and the sustainability of the improvement in the supply and demand of aromatics due to the gasoline premium.
1. 单边：谨慎看多 2. 跨市：暂缓 3. 跨期：内外盘反套；4. 期权：暂缓
累库何时结束 2. 美债利率变化 3.美元指数反弹高度 4. 2季度需求不及预期