Iron ore: When the prices hit the new high, it is easier to get off and come down later
Viewpoint and logic:
Yesterday, the iron ore 2109 contract significantly shrank its lots and fluctuated at a high level, finally closing at 1,100.5 yuan/ton, up 1.38%, or up 15 yuan/ton. Qingdao Port PB fine reported 1,239 yuan/ton, up 4 yuan/ton; Qingdao Port SSF reported 992 yuan/ton, up 7 yuan/ton, and the price difference between high and low quality products continued to narrow by 3 yuan/ton to 247 yuan/ton.
Yesterday, the Handan Air Pollution Prevention and Control Work Leading Group Office issued a notice on the "Handan City's Key Industries Production Regulation Plan for the Second Quarter of 2021". From April 21th to June 30th, the production limit ratio will be adjusted in a timely manner depending on the city’s air quality and meteorological conditions. 600 enterprises in 12 key industries are key controlled enterprises. Relevant regulatory authorities will conduct on-site inspections every day and verify on a company-by-company basis. Each company needs to report specific production plans before April 30th. It is estimated that 20% of the region’s steel production will be affected.
On the whole, following the environmental protection production restriction in Tangshan area, the long-awaited Handan environmental production restriction plan has finally landed yesterday. The policy of restricting and limiting production is like a spark, gradually showing the trend of starting a prairie fire. Recently, the speed of domestic steel destocking during the peak season has continued to slow down, and the overseas epidemic has once again deteriorated. The demand for iron ore is expected to continue to weaken. The continuous record high iron ore price may be extremely high and come down later. Maintaining our previous views, 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: Cautiously bearish
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: domestic raw materials are limited, and rubber prices are supported
On April 21st, the most active traded RU contract closed at 13,910 (-5) yuan/ton, the price of mixed rubber was 12,250 (0) yuan/ton, the basis of most active traded contract was -560 yuan/ton (+80); the open interest of top 20 active traded long positions was 98,070 (-2745) lots and the short position was 140,538 (-3312), net short position was 42,468 (-567).
On April 21st, the most active traded NR contract closed at 11,010 (0) yuan/ton, the STR in Qingdao Free Trade Zone was 1,695 (0) US dollars/ton, the SMR was 1,680 (+5) US dollars/ton, and the SIR was 1,635 (0) US dollars/ton. The basis of most active traded contract was -375 (-10) 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 61.4 (+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, the market price of futures fluctuated strongly, and the current rebound pattern continued. The limited domestic arrivals and the re-increase of downstream cargoes have brought the latest port inventory to continue to decline slightly. The delivery has already begun in northern Thailand, and the phenological conditions of the production area are good. It is expected that the production will be released in the later period. The delivery of domestic production area in Hainan is normal. Due to rubber tree powdery mildew in Yunnan, the full delivery may be postponed to mid-May. Currently, the available raw materials of the factory are relatively small, and the operating rate is less than half of the same period in previous years. Yunnan's inventory has also seen an accelerated decline recently. Rubber prices will be supported in the short term. The gradual increase in supply has weakened the supply and demand drive of rubber, and the room for price rebound is expected to be limited.
Risks: a substantial increase in production, continued accumulation of inventory, and a substantial decrease in demand, etc.
Crude oil: India's pandemic raises concerns, oil prices perform weak
Yesterday EIA announced inventory data. Among them, the increase in crude oil inventories exceeded market expectations, but the increase in gasoline inventories was still low. The fundamentals of the current U.S. market are still relatively strong. Recent data from the U.S. Department of Transportation also shows that the number of weekly interstate travel kilometers has achieved a positive year-on-year increase in April relative to 2019. And the momentum of recovery in gasoline consumption has continued. The recent drop in oil prices is mainly due to concerns about the epidemic in India. The sharp increase in new infections in India has caused the government to re-close the city. However, based on feedback from spot traders, India’s largest oil refiners, Indian Petroleum and Xincheng Industrial, have continued to purchase in the West African oil and other spot markets without significant reduction, while some Indian refineries have slightly reduced. Therefore, the impact on the oil market is still temporarily relatively limited. Since the fourth quarter of last year, the linear correlation between city closures and oil consumption in various countries has declined. Therefore, we believe that the outbreak of the epidemic in India has limited impact on the market at present, but it will slow down the pace of recovery in global oil demand.
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
Copper: Fundamental changes are relatively limited, but the weak US dollar still benefits the non-ferrous sector
Spot market: According to SMM, the spot market performance remained stable during the week. It was difficult to increase its activity, and the market prices fell back slightly from the high level. Also, it was still difficult to stimulate downstream buying interest. Holders had strong bidding sentiment and the stalemate between buyers and sellers continued. In the morning market, flat copper began to report at a discount of 130 yuan/ton. It is difficult to see a large number of transactions. The market adjusted the price to a discount of 140 yuan/ton. The buying acceptance is still not high, but most of the holders are unwilling to adjust the price again. Under the stalemate, the actual transaction was very few. Small number of transactions have been conducted, when some holders adjusted the price to a discount of 150 yuan/ton under the sentiment of cash exchange. The quotations of good copper and wet-process copper are also not too fluctuating. Imported copper inflow is less in the foreign trade market. Good copper remains at a discount of around 70 yuan/ton. Guixi Copper continues to be reluctant to sell, offering few quotations, and stays firm discount of around 50 yuan/ton. W-process copper quotations are also stable at a discount of 230-200 yuan/ton, but the downstream cautious sentiment of holding the current position remains, and the market's buying power is limited.
Opinion: Yesterday, fundamental changes were relatively limited. Holders' sentiment in holding prices remains strong, but the downstream acceptability of current copper prices is still low. As a result, trading has become relatively stalemate. However, there is still some demand for replenishment before May Day, which superimposes the current relatively weak US dollar pattern. Therefore, the current copper price can still maintain a relatively optimistic attitude 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 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.