Iron ore: supply and demand are expected to weaken, inventories continue to accumulate
Opinion and logic:
Yesterday, the open interest of iron ore 2109 contract significantly increased, and the prices fluctuated, finally closing at 1,091.5 yuan/ton, down 0.46% or down -5 yuan/ton. The PB fine of Qingdao Port reported 1,234 yuan/ton, down 5 yuan/ton at 1368 yuan/ton. Qingdao Port SSF reported 985 yuan/ton, down 7 yuan/ton at 1,240 yuan/ton. The price difference between high and low quality products widened by 2 yuan/ton to 249 yuan/ton.
Recently, Fengrui District of Tangshan City has taken stricter emission reduction measures. Hebei issued the main points of the province's ecological environment work in 2021: it is required that the average concentration of fine particles in cities at the prefecture level and above in the province be reduced by more than 3% compared with 2020, and the ratio of good days should reach about 71%. The Jilin Provincial Development and Reform Commission plans to carry out the verification work for the steel industry to resolve excess capacity in 2021. Currently, the eight central environmental protection inspection teams stationed in eight provinces have prepared their work. BHP Billiton's 2021 fiscal year iron ore target guidance volume of 276-286 million tons remains unchanged. Yesterday, the Australian Foreign Minister announced to tear up the "Belt and Road" memorandum and framework agreement signed between China and the Victorian government of Australia. China Shenhua announced that it would abandon the Australian coal project.
In general, following the implementation of the environmental protection production restriction programs in Tangshan and Handan, the policy of restricting production and suppressing production is like a spark, gradually showing a prairie fire. Yesterday Australia tore up the "Belt and Road" agreement, and China-Australia relations continued to deteriorate and escalate. It is expected that the Chinese government's control over iron ore will be strengthened. Recently, the daily consumption of steel scrap in long and short processes has increased significantly, which continues to have a certain squeezing effect on iron ore consumption. The overseas epidemic situation has deteriorated again, the weakening of iron ore supply and demand is expected to increase, and port inventory has continued to accumulate since the beginning of the year. We will continue to maintain our constant views, recommending a combination of go long position of thread and hot-rolled 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-rolled 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-rolled coil end is not as good as expected, the demand for thread and hot-rolled coil end is strong, and overseas pig iron production has exceeded expectations by a large margin.
Rubber: driven by the market sentiment, raw material prices rebounded slightly
On April 22, the most active traded RU contract closed at 13,990 (+80) yuan/ton, the price of mixed rubber was 12,250 (0) yuan/ton, the basis of most active traded contract was -390 yuan/ton (+170); the open interest of top 20 active traded long positions was 98,671 (+601) lots and the short position was 141,994 (+1456), net short position was 43,323 (+855).
On April 22, the most active traded NR contract closed at 11,055 (+45) yuan/ton, the STR in Qingdao Free Trade Zone was 1,705 (+10) US dollars/ton, the SMR was 1,675 (+5) US dollars/ton, and the SIR was 1,645 (+10) US dollars/ton. The basis of most active traded contract was -379 (-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 43.15 (+0.45), latex 58 (+0.5), RSS3 61.85 (+0.45).
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 futures market price remained a trend of strong fluctuation at a high price level. In the current period of limited supply increase and relatively strong demand, the inventory is in the seasonal phase of de-stocking, which supports the prices. The operating rate of domestic downstream tire factories has declined slightly, but the overall operating rate is still at a high level, which has brought about the rapid digestion of downstream raw materials. Also, coupled with the limited port arrivals, the port inventory continues 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. In the domestic Hainan production area, the delivery 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 recently accelerated to decline, resulting in short-term strong support to the rubber. Before a large amount of supply is released, rubber prices are expected to remain strong.
Strategy: Cautiously bullish
Risks: a substantial increase in production, continued accumulation of inventory, and a substantial decrease in demand, etc.
Crude oil: Indian refineries have not yet cut production, but refined oil exports may increase
According to agency forecasts, affected by the outbreak of the epidemic again and the closure of the city, India’s oil consumption is expected to drop by about 12% in April from the previous month, and by 5% in May relative to March. The relative magnitudes of the decreases are about 590,000 barrels/day and 120,000 barrels/day, respectively. According to the current situation of Indian refineries, there is basically no temporary reduction in production. Only the MRPL refinery has reduced production by 60,000 barrels per day, because the refinery has to complete the annual production target set by the government. In addition, Indian refineries recently are still purchasing large quantities of Middle Eastern crude oil that arrived in June. This is relatively consistent with the information previously reported by traders, that is, India has not yet reduced refinery operations and crude oil extraction. However, due to the decline in terminal demand, India’s gasoline and diesel exports will increase significantly in the future, and will suppress Singapore’s refined oil cracking spreads. The resurging epidemics in India intensifies the current differentiated strong and weak market structure in the east and west regions.
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: Downstream has low recognition of current prices, and spot transactions are relatively deadlocked
Spot market: According to SMM, flat copper continued to trade at a discount of 140-130 yuan/ton since the morning market. It is still at a discount of 150 yuan/ton that can attract some trade buying, but the transaction is quite limited. In order to attract trade buying, the quotations of good copper holders were slightly loosened. The CCC-P quotation was slightly adjusted to a discount of around 80 yuan/ton, the price of JNMC copper could be reduced to a discount of 100-90 yuan/ton, and Guixi copper continues to maintain the state of reluctance to sell high prices and maintain stability at a high discount of 60-50 yuan/ton. In order to increase downstream participation in the market, holders have voluntarily reduced PASAR, UMMC, Bulgaria and other brands to a discount of 220-200 yuan/ton. It is reported today that CMCC and MB can be adjusted to a discount of around 250 yuan/ton, but transactions are still scarce.
Opinion: Yesterday, the euro zone central bank's interest rate decision was stabilized as expected, and Chairman Lagarde also emphasized that he has not started discussing the issue of reducing the scale of bond purchases. Therefore, the current orientation of the loose monetary policy of major economies will not be easily changed. In terms of spot stocks, some holders appeared willing to adjust premiums and discounts for shipments yesterday, but because the downstream price recognition is very low, the actual transaction is still weak. At present, we will focus on the situation of replenishment just before the holiday next week. At the moment, we would hold a attitude to be cautiously bullish.
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: promotion through price reduction, high production and sales volume
Balance sheet outlook: In April, the destocking rate was relatively large, gradually entering the stable stage of inventory in May, and the PTA processing fee was fluctuating; however, PX was flat in May, and attention to the demand for oil adjustment prompted PX to strengthen beyond expectations.
Strategic recommendations: (1) Unilateral: wait-and-see (2) Intertemporal: wait-and-see.
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.