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### Daily morning for Crude oil, PTA, natural rubber, iron ore, copper Iro 20210506

submitted 2021-05-06 10:42:31

Iron ore: production increases and consumption is good, the Ministry of Industry and Information Technology restricts production and promotes differentiation

Last week, driven by the good demand for thread and hot-rolled coil and the overall upward trend of the market, the iron ore 2109 contract went out of the previous trend which significantly increased and then went down, closing at 1,088.5 yuan/ton, down 1.45% on a week-on-week basis or 16 yuan/ton. The Platts Index reported at $186.5/ton last Friday, an increase of$1.4/ton on a week-on-week basis. Last week, Qingdao Port PB fine reported 1,288 yuan/ton, an increase of 47 yuan/ton on a week-on-week basis. SSF reported 998 yuan/ton, up 10 yuan/ton. Last week, the iron ore main port had an average daily transaction volume of 1.086 million tons, a decrease of 406,000 tons on a week-on-week basis.

From the supply side, according to Mysteel's statistics, the total global shipment was 32.374 million tons, an increase of 1.61 million tons from the previous week. Among which, the total shipment of iron ore from Australia and Brazil was 24.732 million tons, an increase of 655,000 tons from the previous week. The total shipment from Australia was 19.48 million tons, an increase of 2.537 million tons from the previous week; of which 14.93 million tons were shipped from Australia to China, an increase of 1.41 million tons from the previous week. The total shipment of Brazil was 5.252 million tons, a decrease of 1.882 million tons from the previous week. Last Sunday, the average port congestion volume was 3.0344 million tons, an increase of 190,400 tons from the previous week. The iron ore supply side remained at a high level last week, and there is still room for increase. Due to the holiday season, there was a concentration of port congestion factor at the end of the month, which resulted in a significant increase in port congestion price. However, this high level of port congestion is not unusual.

In terms of demand, according to Mysteel's survey of 247 steel mills, the operating rate of blast furnaces was 80.08%, an increase of 0.65% week-on-week and a year-on-year decrease of 7.55%. The utilization rate of blast furnace ironmaking capacity was 89.93%, an increase of 1.18% week-on-week and an increase of 1.35% year-on-year. The profit rate of steel mill was 90.04%, the same week-on-week and the same year-on-year. The average daily molten iron output was 2.3938 million tons, a week-on-week increase of 31,400 tons, an increase of 36,100 tons year-on-year. The blast furnace operating rate of 163 steel plants was 61.88%, an increase of 0.41% from the previous week, and the capacity utilization rate was 73.47%, an increase of 0.35% week-on-week. The utilization rate excluding the eliminated capacity was 79.98%, which was 4.24% lower than the same period last year, and the profit rate of steel mills was 79.14%, the same week-on-week. Last week, with the impact of the increase in capacity utilization of steel mills and the resumption of work, the demand side of iron ore showed good performance in stages.

In terms of inventory, according to Mysteel's survey of 45 ports across the country, the imported iron ore inventory was 130.2669 million tons, a decrease of 2.9351 million tons from the previous week. Among them, the Australian number was 66.3852 million tons, which was a decrease of 815,800 tons from the previous week. The Brazilian figure was 38.9555 million tons, which was a decrease of 1.5535 million tons from the previous week. Pellets amounted to 4.5198 million tons, a week-on-week decrease of 356,500 tons. The iron ore concentrate number was 8.8904 million tons, a decrease of 188,200 tons on a week-on-week basis. Lump ore reported 18.7265 million tons, a week-on-week decrease of 793,300 tons, while fines stood at 98.1302 million tons, a decrease of 1.5971 million tons from the previous week. Port inventory has continued to accumulate since the beginning of the year. Before the beginning of Labor Day Holiday, due to the obvious decline of arrivals and short-term stocking reasons, port inventory has temporarily decreased. In the later period, the pattern of accumulation will continue to exist, and the extent of accumulation will increase.

On the whole, the current iron ore performance is relatively good at the near end, and a certain surplus pattern will appear in the long term based on policy deduction. In the short term, due to the recovery of global demand and the ultra-loose monetary policy, foreign steel products prices have skyrocketed and steel consumption continued to improve. Following the rise in China, coupled with the high profits of steel mills, the iron ore sentiment is more optimistic. With the additonal repair of discount, iron ore has shown a strong performance in the short term. However, the peak of iron ore demand is coming, which will quickly reverse its supply and demand pattern. At the same time, in the long run, under the background of carbon neutrality and carbon peaks, the policies of restricting production in various regions will be gradually introduced. The time point is still inconclusive, but the implementation of the principle of total control, tight time and heavy tasks, will highlight the supply and demand contradiction of iron ore. Limiting production will still be the core logic of this year’s transaction. The key to the later price trend will be the scope and extent of domestic restriction of production. If the limit of production is no longer expanded, the supply and demand of iron ore will generally be slightly surplus, and once the scope of limitation of production is expanded, then 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. We recommend investors to hold the long-term bearish views, and go short positions when facing unilaterally continuous increases. The short orders need to be adjusted in accordance with the rhythm of the non-ferrous metals market and the introduction of policies to avoid the repair of the discount after the premium is too large and the strong rebound driven by the sharp rise in the thread and hot-rolled coil. At the same time, the safest strategy is to go long positions of thread and hot-rolled coil and compare the prices of all iron ore varieties.

Strategy: None

Unilateral: Neurally bearish in the short-term, and hold the bearish view in the long-run

cross-species: go long position of thread or hot-rolled coil and short position of iron ore

Inter-period: None

Spot-Futures Arbitrage: None

Options: buy at out-of-value 09 put options or sell out-of-value 09 call 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: Supply support still exists, and rubber prices fluctuate strongly

Rubber continued to rebound slightly before the holiday. Under the rise of crude oil prices, the market's expectations for inflation have resumed, and the warm market sentiment has brought rubber prices to continue to rebound. At the same time, due to the limited output of raw materials at home and abroad, cost support and the continuous decline of domestic port inventories have all supported the price of rubber.

The total inventory of domestic exchanges as of April 30 was 178,192 tons (+650), and the amount of futures warehouse receipts was 176,240 tons (+2,160). In the initial stage of domestic delivery, the overall output was limited, but the raw material output in Hainan production area was relatively large. And due to the decline in the price of emulsion rubber, part of it flowed into the dry rubber factory, which brought last week's warehouse receipts and total inventory rebound. As of April 25, inventory in the Qingdao Free Trade Zone continued to fall slightly, and the decrease in arrivals at the port was greater than the decrease in downstream acquisitions, resulting in a net outbound status. Based on the fact that overseas production is small and the operating rate of domestic tire factories is still relatively high, it is expected that the port destocking can still be maintained until May.

According to Zhuochuang's understanding, the new rubber in the domestic production areas has been released one after another, but compared with the Hainan production area, Yunnan is expected to show a large-scale growth after mid-May, and the short-term release of new rubber is limited. However, from the terminal point of view, due to the slowdown in the pace of finished products digestion, resulting in inventory backlogs, the market is expected to heat up for subsequent reductions in start-ups. Therefore, the trading sentiment in the spot market is sluggish, and the terminal purchases on demand, while there is no obvious willingness to hoard stocks. The center of gravity of US dollar prices in Qingdao Free Trade Zone has risen, and overall offers are active. In contrast, buying orders are relatively weak. Affected by the recent increase in inventory pressure and the expected decline in the start of construction during the May Day Holiday, buying sentiment in the downstream is general. The focus of the external market price has risen mainly. At present, the release of new rubber in Thailand's production areas is relatively limited. The purchase price of raw material rubber has fluctuated and increased, supporting the increase in US dollar cargo prices. However, due to the weak domestic terminal buying sentiment, the overall cargo transaction sentiment is general. As of last weekend, the premium of synthetic rubber was -25 yuan/ton (+225). In recent weeks, the price of natural rubber has continued to rise, which has significantly narrowed the price difference.

In terms of downstream tire operating rate, as of April 29, the operating rate of all-steel tire companies was 72.96% (-2.69%), and the operating rate of semi-steel tire companies was 70.89 (-1.45%). The operating rate continued to decline last week, which may reflect signs of weakening demand.

Opinion: The prices of external markets fluctuated strongly, and the domestic heavy-duty truck sales data announced during the holidays remained strong. The cumulative sales in the first four months increased by 57% year-on-year. The worsening of the epidemic situation in India has curbed the demand for rubber in the short term. India's rubber demand accounts for about 7% of the world. Under the influence of external bearish factors, rubber prices are expected to return more to their fundamentals. On the supply side, rubber trees in Xishuangbanna, Yunnan, affected by powdery mildew, will be postponed to full-scale delivery in mid-May. The current delivery rate is only about one-third of the same period in previous years. Rubber delivery in Hainan is normal, but most of the raw materials flow into thick latex. Therefore, the short-term growth rate of exchange warehouse receipts is slow, but it is expected to increase gradually. On the demand side, due to the slight decline in the operating rate of domestic tire factories for two consecutive weeks, there are signs of weakening. It is understood that it is mainly caused by the domestic replacement market and the decline in exports. Therefore, supply and demand are weak. In the short term, before the demand has fallen significantly, the support from the supply side may be more prominent. It is expected that rubber prices are expected to remain strong next week, but attention must be paid to the pressure of supply release in late May.

Strategy: cautiously bullish, participate in the short term

Risks: domestic supply may increase sharply, demand continues to weaken due to the impact of the epidemic, and funding would be tight

Crude oil: Oil prices continue to rise during holidays, and the oil market maintains a split pattern

In summary, the current crude oil market is still a typical divergence pattern, with futures performing stronger than spot goods, and the western region stronger than the eastern region. At this point in time, it is still in the intermediate link such as traders and refineries that actively destock. Although the unilateral oil price performance is relatively strong, the physical discounts and the performance of refinery profits are still tepid. But we believe that with the gradual restart of the economy in Europe and the United States and the arrival of summer travel peaks, superimposed on the gradual return of buying interest after the overhaul of Chinese refineries, it is expected that the crude oil market will change from active destocking in the midstream to downstream and active restocking by refineries in the third quarter. Therefore, the spot market may improve significantly. The core focus of the market is still the pace and magnitude of demand recovery. In addition, the progress of Iran's nuclear talks also needs to be focused on.

Strategy: cautiously bullish, none

Risk: Iran’s nuclear talks are accelerating, and oil sanctions are lifted earlier than expected

SMM讯，430日当周SMM1#电解铜平均价运行于69,940/吨至72,330/吨，平水铜平均升贴水报价于周一至周四则是运行于-255/吨至-140/吨之间，现货市场方面，5.1假期之前，由于铜价格呈现大幅走高的态势，故此使得下游畏高拒采的情绪严重，从而使得节前补库的情况并不明显。节后去库速度则是需要关注的重点。

1. 单边：谨慎看多 2. 跨市：暂缓 3. 跨期：跨期正套；4. 期权：卖出虚值看跌

1. 流动性收紧的风险 2. 国内交仓情况 3. 2季度去库不及预期

Copper: U.S. dollar rebounds with crude oil, copper prices continue to fluctuate and strengthen

Spot market:

According to SMM, the average price of SMM1# electrolytic copper in the week of April 30 was between 69,940 yuan/ton and 72,330 yuan/ton. The average premium and discount price of flat copper was between -255 yuan/ton and -140 yuan/ton from Monday to Thursday. In the spot market, before the May Day holiday, copper prices showed a sharply higher trend, which made the downstream mood of fear of high prices and refusal to purchase serious, and the situation of replenishment before the holiday was not obvious. The speed of de-stocking after the holiday is the key point that needs attention.

Opinion:

short term:

Last week, the domestic imported mine TC price rebounded to \$32.48/ton, indicating that the tension in overseas mines may gradually ease in the second quarter. However, due to the relatively high freight rates at the moment, whether the input of imported mines can match the peak season of traditional domestic demand still needs continuous attention. The follow-up domestic destocking is the focus of future monitoring. On the macro side, the US dollar index is currently showing a substantial rebound, which to a certain extent inhibits the continued upward attack in copper prices. However, the recent strength of crude oil prices will form a support pattern for copper prices from the perspective of inflation. Therefore, at the current point in time, copper prices may temporarily fall into a relatively tangled pattern. It is expected that in the short term, it will still be dominated by a shock upward pattern.

Medium and long term:

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.

Strategy:

1. Unilateral: cautiously bullish

2. Inter-market: postpone

3. Inter-period: forward arbitrage

4. Options: sell at out-of-value and to be bearish

Focus point:

1. The risk of liquidity tightening

2. Domestic delivery situation

3. Destocking in the second quarter fell short of expectations

PTA：逸盛合约减量，关注后续是否有额外检修

PTA: Yisheng contracts’ reduction, pay attention to whether there will be additional maintenance.

Balance sheet outlook: In May, the expectation of a small de-stocking continues, and pay particular attention to whether the follow-up Yisheng will have more additional maintenance to increase the de-stocking; 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.