Iron ore: Steel tax rate adjustments are implemented, and iron ore basis is stronger
Opinion and logic:
Yesterday, the open interest of iron ore 2109 contract retreated heavily throughout the day. The intraday showed a downward trend in lots and prices first, and then witnessed a rebounded upward trend. The buy long still performed relatively positively. The contract finally closed at 1,139 yuan/ton, down 1% or 19.5 points, with open interest slightly added 1,000 lots. Qingdao Port PB fine reported 1,301 yuan/ton, down 5 yuan/ton, discounted of 1,442 yuan/ton, and the main contract basis was 303. SSF reported 1,010 yuan/ton, down 5 yuan/ton, discounted of 1,267 yuan/ton, and the main basis was 129. Port spot transactions were 1 million tons, a week-on-week decrease of 260,000 tons. The price difference between high and low quality products remained stable, standing at a high level of 291 yuan/ton. The holiday was approaching and the replenishment was nearing the end. The market sentiment continued to weaken, but the sentiment of trade was still strong.
Yesterday the State Council’s Tariff Commission announced the long-talked-about issue of reducing steel export tax rebates. Some export tax rebates have been reduced from the original 13% to 0. At the same time, the import tariffs on billets, pig iron and other products have been abolished in order to reduce exports and increase imports to stabilize the supply reduction caused by domestic production restriction. If it can be realized, the domestic demand for iron ore will decline significantly, and the situation on the ore demand side will be precarious.
In general, the current long-term and short-term logic of iron ore is slightly different. In the short term, due to the improvement of overseas epidemic situation and the resumption of production in various regions, as well as the domestic steel products have skyrocketed, steel consumption continues to improve, resulting in steel mills’ high profits. The market sentiment of the iron ore is more optimistic, and coupled with the discount repair, the iron ore still fluctuates strongly in the short term. However, in the long run, under the background of carbon neutrality and carbon peaks, the policies of restricting production and suppressing production in various regions are like a spark, and gradually showing a prairie fire. Production restriction will still be the core logic of this year's transaction, and the key to later price trends will lie in the scope and extent of domestic production limitation. If production restrictions are no longer expanded, the supply and demand of iron ore will generally be slightly surplus. Once the scope of suppressed production is expanded, iron ore will enter a state of surplus, and steel mill profits are expected to continue to expand. In the future, more attention should be paid to changes in the policy level, a long-term bearish view should be held, and someone can unilaterally carry out short operations when the price is high. The short position orders needs to be adjusted or avoided the strong rebound caused by the repair of the discount after the discount is too large in accordance with market expectations, and it can also go long position of thread or hot coil by comparing the prices, or choose to buy at out-of-value far-month put options.
Unilateral: hold the current position in the short-term, and neutrally hold the view of long-term bearish
cross-species: go long position of thread or hot-rolled coil and short position of iron ore
Spot-Futures Arbitrage: None
Options: buy at out-of-value 09 put options
Concerns and risks: The intensity of production restriction at the thread and hot-rolled coil end is not as good as expected, the demand for the thread and hot-rolled coil end is strong, and overseas pig iron production has exceeded expectations by a large margin.
Rubber: In the early stage of delivery, overseas raw material prices were firm
On April 28, the most active traded RU contract closed at 13,960 (+150) yuan/ton, the price of mixed rubber was 12,200 (-150) yuan/ton, the basis of most active traded contract was -635 yuan/ton (-155); the open interest of top 20 active traded long positions was 103,459 (-620) lots and the short position was 154,178 (-2,507), net short position was 50,719 (-1,887).
On April 28, the most active traded NR contract closed at 11,095 (+125) yuan/ton, the STR in Qingdao Free Trade Zone was 1,700 (+10) US dollars/ton, the SMR was 1,685 (+10) US dollars/ton, and the SIR was 1,655 (+10) US dollars/ton. The basis of most active traded contract was -362 (-72) yuan/ton.
As of April 23: the total inventory of the exchange was 177,542 (-60) lots, and the warehouse receipts of exchange were 174,080 (-60) lots.
Raw materials: sheet rubber 58.69 (0), cup lump 43.8 (-0.2), latex 60 (+0.5), RSS3 63.89 (+0.34.
As of April 22, the domestic all-steel tire operating rate was 75.65% (-0.36%), and the domestic semi-steel tire operating rate was 72.34% (-0.47%).
Opinion: Yesterday, the rubber futures price fluctuated strongly at high price level, and the price center moved up slightly. At the initial stage of delivery at home and abroad, the increase in output was limited, the prices of raw materials in Thailand were firm, and the prices of raw materials in the main production areas of Yunnan rose slightly. As the rubber trees in Banna, Yunnan, suffer from powdery mildew, the delivery rate is low, and the raw materials from Hainan are released normally, resulting in lower raw materials in the main producing areas of Hainan this year than in Yunnan. According to the current raw material prices of Hainan Jingan rubber factory, the most-active contract of RU is 13,500 yuan/ton, which has strong support. At present, rubber presents a pattern of weak supply and demand, but the small supply side has a greater impact, bringing the continued downward trend of domestic port inventory. Before the release of production in the main producing areas in June, it is expected that rubber prices are expected to maintain strong volatility at a high level.
Strategy: cautiously bullish, go long position in the short term
Risks: a substantial increase in production, continued accumulation of inventory, and a substantial decrease in demand, etc.
Crude oil: EIA data is in favor of positive market, oil prices continue to rebound
Yesterday, EIA announced weekly data, with the overall trend was in favor of positive market. Crude oil inventories increased slightly, while refined oil inventories increased much lower than expected. Gasoline inventories increased slightly while distillate oil inventories fell far more than expected. From the demand side, gasoline has recently performed strongly in both the domestic liquidity indicators and the number of kilometers traveled in the United States. News on diesel consumption shows that the current truck oil consumption has also continued to increase, which is mainly boosted by fiscal policy stimulus. It is worth noting that the current US gasoline and diesel exports are still relatively sluggish. In the case of weak import demand in Latin America, the US refineries are currently operating more cautiously. However, if subsequent refined oil inventories continue to be low and refinery profits remain, it is expected that the U.S. refinery operating rate is expected to increase further as the summer travel season arrives in the future.
1. 单边：谨慎看多 2. 跨市：内外盘反套 3. 跨期：暂缓；4. 期权：卖出看跌
1. 美联储货币政策导向 2.美元指数走势 3. 2季度需求是否能达预期
Copper: U.S. dollar weakens again after the meeting discussing the interest rate, while copper price remains strong.
Spot market: According to SMM, the market price has pulled back nearly 1,000 yuan, and the buying power in the downstream market has strengthened. The market trading activity has also improved, which has led to a rise in premiums and discounts. In the morning market, the monthly quotation of flat copper was at a discount of 230 yuan/ton, and some holders had a demand for cash exchange. After being pressed down to a discount of 250-240 yuan/ton, the market price stabilized at a discount of around 230-220 yuan/ton. The downstream just needs to replenish the warehouse, the market transactions are acceptable, and even a small discount of 210 yuan/ton is heard in the late trading, and the market sentiment is obviously picking up. The quotations of good copper and wet-process copper stopped falling and recovered simultaneously. Good copper reported a discount of 200-160 yuan/ton, and Guixi copper holders even reported a discount of 150 yuan/ton, regaining the sentiment of supporting the price level. A small amount of wet-process copper sources continued to flow in. In the morning market, the quotes rose slightly after a discount of 320 yuan/ton. In the late trading, it was heard that ESOX and other brands reported a discount of around 280 yuan/ton.
Opinion: Yesterday, the Federal Reserve's interest rate decision remained unchanged as always, and Chairman Powell also emphasized in his speech that he would not consider reducing the size of bond purchases for the time being. Such dovish remarks also caused the US dollar index to fall sharply again. In this process, copper varieties with relatively strong financial attributes have benefited again. From a fundamental point of view, the change is not very significant. Therefore, under the current pattern of weak dollar trends, copper prices are expected to remain strong.
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: reverse arbitrage of internal and external markets
3. Inter-period: postpone
4. Options: sell and to be bearish
1. Fed's monetary policy orientation
2. Dollar index trend
3. Whether the demand in the second quarter meet expectations
PTA: Yisheng May contract reduction is expected to boost PTA processing fees
Balance sheet outlook: In May, the inventory will be stable or continue to be destocked, and we will pay attention to whether there will be more additional maintenance plans announced by Yisheng; however, PX has only a small accumulation in May, focusing on the support for PX from the demand for oil blending.
Strategic recommendations: (1) Unilateral: cautiously bullish (2) Intertemporal: hold the current position, under the circumstance that the price difference of 9-1 has rebounded sharply recently, waiting for reverse arbitrage opportunities when high prices appear.
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.