Iron ore: The market participants are cautiously holding their current positions, while iron ore fluctuates at high levels
Opinion and logic:
Yesterday, the price of iron ore rose sharply and then fell, showing high fluctuations at high levels throughout the day. The iron ore 2109 contract closed at 1,306.5 yuan/ton, down 19.5 yuan/ton or 1.47% from the closing price of the previous trading day, with open interest decreasing 14,644 lots. In terms of spot, the PB fine of Qingdao Port reported on the 11th at 1,630 yuan/ton, a slight decrease of 20 yuan/ton. The iron ore spot market activity in the early trading on the 11th declined, but the spot price remained strong. The market participants are cautiously holding their current positions and the whole transaction was general.
In terms of demand, Mysteel predicts that crude steel production will continue to increase in early May. The national crude steel output is estimated to be 30,273,200 tons, with an average daily output of 3.0273 million tons, an increase of 1.26% from the end of April and an increase of 7.44% year-on-year. Driven by the peak demand season and high profits, steel mills are still highly motivated to produce.
In terms of news, data released by the National Bureau of Statistics on the 11th showed that in April 2021, CPI rose 0.9% year-on-year, an increase of 0.5 percentage points from the previous month; PPI rose 6.8% year-on-year, an increase of 2.4 percentage points from the previous month. The report pointed out that domestic industrial production recovered steadily in April, the prices of international commodities such as iron ore and non-ferrous metals rose, and prices in the production sector continued to rise. From a month-on-month perspective, PPI rose by 0.9%, a decrease of 0.7 percentage points from the previous month. Among them, the price of means of production rose by 1.2%, a drop of 0.8 percentage points.
On the whole, steel is in the peak season of consumption, and the overall demand is relatively strong. Driven by high profits, steel mills are still highly motivated to produce, forming a certain degree of support for the raw material side. The uncertainty of Sino-Australian relations has triggered recent market concerns about the supply of iron ore, which has also promoted the rise of iron ore to a certain extent. However, in the medium and long term, the price of iron ore is currently at a high level, and under the background of "carbon peak" and environmental protection of production restrictions, the production limitation policies in various regions have become more stringent. Once the policy of restricting production is implemented, iron ore demand will gradually weaken, and iron ore is likely to enter a state of surplus. Therefore, as the absolute price of iron ore continues to increase, the risk is further intensified. Therefore, the position needs to be controlled, and more attention should be paid to changes in the policy level in the future. We recommend market participants to neutrally hold their current positions in the short term and to be bearish in the long run.
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: There is no highlights in supply and demand data, and rubber prices have fallen again.
On May 11, the most-active RU contract closed at 14,165 (-430) yuan/ton, the price of mixed rubber was 11,950 (-50) yuan/ton, the basis of most-active contract was -565 yuan/ton (+5); the open interest of top 20 actively traded long positions was 106,127 (+2,250) lots and the short position was 165,772 (+4,332) lots, net short position was 59,645 (+2,082).
On May 11, the most-active NR contract closed at 11,410 (-320) yuan/ton, the STR in Qingdao Free Trade Zone was 1,745 (-35) US dollars/ton, the SMR was 1,735 (-30) US dollars/ton, and the SIR was 1,710 (-30) US dollars/ton. The basis of most-active contract was -423 (+97) yuan/ton.
As of May 7: the total inventory of the exchange was 178,182 (-10) lots, and the warehouse receipts of the exchange were 176,140 (-100) lots.
Raw materials: Sheet rubber 61.5 (0), cup lump 47 (+0.25), latex 65.5 (+1.7), RSS3 68.72 (-0.39).
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: The price of rubber fell sharply yesterday, and basically gave up last week's gains. Yesterday, the prices of raw materials in Thailand's main producing areas were mixed. With limited output, the prices of raw materials were still at a relatively high level year-on-year. In China, due to the fact that the Yunnan Banna area has not yet been fully delivered, the price of raw materials is relatively strong, resulting in less dry rubber output and strong cost support under the rubber. There are signs of weakening on the demand side. The operating rate of domestic tire factories has declined slightly, and the inventory of tire factories and terminal dealers has rebounded, which may reflect the weak demand. However, due to the greater impact of short-term supply, domestic port inventories continued to decline. After June, when production at home and abroad begins to release, the trend of destocking at domestic ports can be reversed. There is no more good news in the rubber market, and more fluctuations might be witnessed in the short term.
Risks: production increases significantly, inventory continues to accumulate, and demand falls sharply, etc.
Crude oil: Colonial pipeline is expected to restart within this week
From the statement of Colonier Pipeline, the company will restart the pipeline before this weekend. We believe that the current pipeline restart time is affected by two factors. One is whether the Colonial pipeline will pay hackers a ransom to avoid the losses caused by a long pipeline downtime, and the other is the difficulty of manually restarting the pipeline. Because the daily operations of the Colonial pipeline are highly automated, manual restarting of the pipeline will consume more manpower and is more difficult. But in the case of negotiating with hackers to no avail, this will be a relatively better solution at this stage. From the perspective of the impact of the Colonial Pipeline on the flow of US refined oil trade, the eastern U.S. region will increase imports from Europe, while the U.S. gulf refineries will increase exports to Latin American countries. And if the downtime is longer, it is not ruled out that the United States may temporarily waive the Jones Act to reduce the cost of shipping from the U.S. gulf to the U.S. east.
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: Fundamental changes are limited, and copper prices fluctuate at high levels
Spot market: According to SMM news, even if the market pulled back as much as 1,000 yuan yesterday, it was still difficult to stimulate market buying power. The overall spot market remained sluggish, and buying side continued to keep prices down, and premiums and discounts unexpectedly showed a downward trend. In the morning session, flat copper first reported at a discount of 70 yuan/ton. It is difficult for downstream buying to accept. Some holders want to change the price for shipments, adjusting to a discount of 90-80 yuan/ton. However, there is still a gap between such price and the buyer's expectation. Before and after the second period, the price can be reduced to a discount of 110 yuan/ton. In late trading, it was even heard that the holders wanted to exchange spot. A large volume of resources with a discount of 120 yuan/ton was flowed out, and then the market's trading activity picked up. Good copper was close to the delivery date, and the quotation was relatively strong, basically quoted at a discount of 40 to 20 yuan/ton. Guixi copper holders showed a reluctance to sell, and even reported a premium of 20 yuan/ton, but the buyer was difficult to accept and the actual transaction is very few. The supply of wet-process copper remains scarce. It is heard that a small amount of ESOX, Spence and other sources are reported to have a discount of 160-140 yuan/ton. Most of the market uses brands such as PASAR and GRESIKE to attract downstream just-needed replenishment at the same price.
Opinion: Yesterday, copper prices still maintained a high volatility pattern at high price levels. Although the price once fell in the day, it did not seem to stimulate very strong buying demand for the time being. The overall transaction was still few, and the holders did not seem to take the initiative to give up the premium or discount for shipments. So overall, the fundamental changes are relatively limited. However, the continued weakness of the U.S. dollar index still largely provided more favorable support for copper prices. In addition, US CPI data will be announced this evening. If the impact of inflation is also positive, copper prices are expected to remain relatively strong.
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: processing fees slightly fell again .
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: 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.