Iron ore: The market has strong bullish sentiment, and the one-direction non-continuous quotation under the price limit continues to happen with iron ore contracts
Affected by the sharp rise in the spot market over the weekend, a lot of ferrous commodity contracts hit their up limits in early trading yesterday, and the price of iron ore also continued its upward trend to hit a record high. The iron ore 2109 contract hit its up limit of 1,326 yuan/ton, an increase of 99.5 yuan/ton, or 8.1%, from the closing price of the previous trading day, with open interest losing 50,000 lots. In terms of spot, Qingdao Port PB fine reported 1,650 yuan/ton on the 10th, an increase of 180 yuan/ton. Trading activity in the spot market is still high, the overall market is full of bullish sentiment, and traders have a strong willingness to raise prices.
On the supply side, according to Mysteel's statistics, the total shipment of Australia and Brazil iron ore last week was 24.819 million tons, an increase of 303,000 tons from the previous week. Australia shipped 19.352 million tons, an increase of 2.092 million tons from the previous week. Brazil shipped 5.467 million tons, a decrease of 1.789 million tons from the previous week. The total global shipment volume was 32.477 million tons, a decrease of 276,000 tons from the previous week. Last week, the arrivals of China’s 45 were 22.964 million tons, an increase of 2.225 million tons from the previous week. Among them, the arrival from Australia was 15.819 million tons, an increase of 1.796 million tons from the previous week; the arrival from non-mainstream ores was 4.135 million tons, an increase of 883,000 tons from the previous week; the arrival from Brazil was 3.01 million tons, a decrease of 454,000 tons from the previous week. The total arrivals of the six northern ports were 10.719 million tons, a decrease of 231,000 tons from the previous week; the total arrivals of China's 26 ports were 22.323 million tons, an increase of 2.217 million tons from the previous week. Affected by extreme weather, Brazil’s iron ore shipments declined last week, but the total arrivals of China’s 45 ports still maintained a positive growth.
In terms of news, according to Xinhua News Agency, Luo Tiejun, vice chairman of the China Iron and Steel Association, believes that the main reason for the high iron ore price is the high concentration of the supply side, and the dominant power is in the hands of the seller. In addition, market expectations and hype are large. He called for the authorities to give full play to the guiding role of the government in the case of market mechanisms failing to effectively curb the rising trend of iron ore prices.
Generally speaking, due to the periodic fluctuations in supply and demand and the impact of frequent market news, the price of iron ore has risen sharply, but in the long run, domestic production restriction still limits iron ore demand, so the increase is not sustainable. In the short term, steel mills' enthusiasm for production, driven by high profits, has not slowed down. It has formed a certain degree of support for the raw material side. Coupled with the improvement of overseas epidemics and economic recovery, iron ore consumption remains relatively strong. However, in the medium and long term, the current iron ore price has been at a high level, and the production limitation policies in various regions have become increasingly strict. Once the scope of production restriction is expanded, the demand for iron ore will gradually weaken, and iron ore market is likely to enter a state of surplus. In the future, more attention should be paid to changes in the policy level. We recommend investors to neutrally hold the current position in the short term and to be bearish in the long term.
Unilateral: Neutrally hold the current position in the short-term, and to be neutrally bearish in the long-run
Cross-species: go long position of thread or hot-rolled coil and short position of iron ore
Spot-Futures Arbitrage: None
Options: but at out-of-value 09 put options or sell at 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: domestic raw material output is limited and prices are firm
On May 10, the most-active RU contract closed at 14,595 (+150) yuan/ton, the price of mixed rubber was 11,950 (-50) yuan/ton, the basis of most-active contract was -570 yuan/ton (-50); the open interest of top 20 actively traded long positions was 103,877 (-3,100) lots and the short position was 161,440 (+1,003), net short position was 57,563 (+4,103).
On May 10, the most-active NR contract closed at 11,730 (+70) yuan/ton, the STR in Qingdao Free Trade Zone was 1,780 (+15) US dollars/ton, the SMR was 1,765 (+10) US dollars/ton, and the SIR was 1,740 (+15) US dollars/ton. The basis of most-active contract was -520 (-17) yuan/ton.
As of May 7: the total inventory of the exchange was 178,182 (-10) lots, and the warehouse receipts of exchange were 176,140 (-100) lots.
Raw materials: No quotation is available for the Thai Spring Plowing Festival. Sheet rubber 61.5 (0), cup lump 46.75 (0), latex 63.8 (0), RSS3 69.11 (0).
As of May 6, the domestic all-steel tire operating rate was 51.93% (-21.03%), and the domestic semi-steel tire operating rate was 55.30% (-15.59%).
Opinion: Driven by the market sentiment, the rubber futures price remained strong and volatile yesterday. At present, due to the limited output of raw materials in the main domestic production areas, especially the Yunnan Banna area has not yet been fully delivered, there is even news that the local rubber may have the risk of secondary falling leaves. This will further delay the increase of raw materials, making both of short-term raw material prices and the cost support under the rubber to be strong. There are signs of weakening on the demand side, but the overall operating rate of domestic tire factories is still relatively high, which has brought about a continuous decline in domestic port inventory. Or after June, when domestic and overseas production begins to be released, the trend of inventory destocking can be reversed, resulting in the rubber prices fluctuate at a high level.
Risks: production increases significantly, inventory continues to accumulate, and demand falls sharply, etc.
Crude oil: The Colonial Pipeline shuts down, some US Gulf refineries cut production
The closure of the Colonial Pipeline continues to adversely affect the market. We believe that in addition to tightening the supply of refined oil in the Eastern U.S., the main impacts are reflected in: 1. If the downtime is too long, it may cause the U.S. Gulf refineries, especially in the Louisiana State and Eastern Texas to experience production reduction. Because the refinery must try to avoid the expansion of refined oil storage due to pipeline shutdowns, we have seen that some refineries such as Port Arthur have experienced production cuts. From this perspective, the decline in refinery operating rates will lead to the bullish sentiment for short positions of US crude oil consumption; 2. For refined oil products in the Eastern United States, distillate oil will be more affected than gasoline. Because of the high expected price of renewable energy transactions, distillate imports in the eastern US were in a sluggish state before the pipeline was down. At present, US refineries mainly produce gasoline, and the ratio of gasoline to diesel is at a historically high level. Therefore, the impact of pipeline shutdown on the supply of distillate in the East of the United States is more significant than that of gasoline. But in general, we believe that the probability of a long-term shutdown of the Colonial pipeline is low, and the impact on the market is relatively limited.
策略：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
关注点：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: copper prices are as high as expected and spot transactions are deadlocked
Spot market: According to SMM news, both trade buying and downstream buying have stopped and held their current positions yesterday. The buying interest was weak, and the market offer opened higher and then lowered. In the morning market, flat copper was quoted at a discount of 70-60 yuan/tons, but the market continues to rise broadly, and market buying is difficult to accept the situation. Some holders first adjusted the price to a discount of 80 yuan/ton in order to exchange for spot, and then it was still difficult to attract the market to buy, so they actively adjusted the price to a discount of 90 yuan. Such that, the transaction slightly increased. Around the second period, the market heard a discount of 100 yuan per ton, attracting some trade buying orders, but the overall transaction was still not active. Due to the approaching delivery, the overall quotation of the good copper is relatively strong. Basically, it is quoted at a discount of 60-30 yuan/ton. It is even heard that some Guixi copper holders are quoting at a discount of 20 yuan/ton. However, the market prices are broadly high, and the price is not as cost-effective as flat copper, causing the actual transaction to be very few. Wet-processing copper is still difficult to find a large number of sources when the import window is closed for a long time. Under the guidance of brands such as Gresike, PSR, DMK, etc., a discount of 160-140 yuan/ton is reported.
Opinion: Yesterday, the copper price continued to maintain a high volatility pattern. The US dollar index and long-end U.S. Treasury yields showed a downward trend on the macro side. Coupled with the positive feedback on inflation brought about by the recent gradual increase in crude oil such market sentiment made copper prices to be easy to increase but different to fall in the current stage. However, the continued high copper price has also made downstream purchases more cautious, and even showed that downstream companies refused to purchase or even breached their contracts. This also caused a slight increase in inventories during the traditional peak season of copper in the near future. However, if the market price can show a certain fall in the future, downstream purchases will also be stimulated with a high probability. Therefore, from an operational point of view, it is still recommended to go long positions when the market reaches a low level.
Medium- and long-term perspective: 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 at out-of-value put options
1. Fed's monetary policy orientation
2. Dollar index trend
3. Whether the demand in the second quarter meet expectations
PTA: polyester production and sales fell again at the beginning of the week
Balance sheet outlook: In April, the inventory was largely destocked, and in May it eased to a small to medium destocking, and the destocking rate has slowed down; and pay particular attention to whether Yisheng will have more additional maintenance to increase the de-stocking; however, PX changed to a slight destocking expectation in May, focusing on the support of oil adjusting demand for PX.
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 gaps 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.