Iron ore: pay attention to the regulation policy and production restriction policy under the background of "carbon neutrality".
Opinion and logic:
Last weekend, due to short-term inflation exceeding expectations, coupled with the fear of high prices in the ferrous metals industry chain, the overall commodity market pulled back broadly, especially for the ferrous products. As of this week, iron ore futures are gradually being repaired. The open interest of the most-active contracts increased significantly, closing at 1,242.5 yuan / ton, an increase of 45.5 yuan/ton or 3.76% from the closing price of the previous trading day, with open interest gaining 5,338 lots.
In terms of spot, the port price of imported ore in the early trading on the 18th was temporarily stable. Qingdao Port PB fine reported 1,548 yuan/ton, an increase of 20/ton compared to yesterday. Port traders are still enthusiastic about making offers, and the quotation range is generally maintained at 10-20 yuan/ton. However, due to the sharp decline from high levels and large fluctuations in the recent market, the market has a strong wait-and-see attitude, and speculative transactions are sluggish. In terms of preference, due to the tight resources of steel mills in the trade of medium and high grade products and high profits for steel mills, some steel mills are more inclined to purchase medium and high grade resources.
On the supply side, the National Development and Reform Commission stated that it will increase the exploration and development of iron ore resources, actively investigate the situation of steel and iron ore, and is speeding up the preparation of an action plan for peaking carbon emissions by 2030. On the one hand, it will reduce the degree of external dependence; On the other hand, the major premise of "carbon neutrality" will remain unchanged, and a loosening and tightening bilateral regulation policy will be carried out.
On the demand side, from a short-term perspective, although the April data shows that the new construction area data is poor, sales still remain hot. From a cyclical perspective, 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. As the price of iron ore continues to rise, the fear of high price levels in the market continues to spread, and the risks are further increasing. 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
Spot-Futures Arbitrage: None
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: The number of arrivals at the port is small, and port inventory continues to decline.
On May 18, the most-active RU contract closed at 13,390 (+30) yuan/ton, the price of mixed rubber was 12,150 (0) yuan/ton, the basis of most-active contract was -515 yuan/ton (-30); the open interest of top 20 actively traded long positions was 115,369 (-2,796) lots and the short position was 165,653 (-3,564) lots, net short position was 50,284 (-768).
On May 18, the most-active NR contract closed at 10,790 (-60) yuan/ton, the STR in Qingdao Free Trade Zone was 1,680 (0) US dollars/ton, the SMR was 1,670 (0) US dollars/ton, and the SIR was 1,645 (0) US dollars/ton. The basis of most-active contract was -203 (+68) yuan/ton.
As of May 14: the total inventory of exchanges was 178,432 (+250) lots, and the warehouse receipts of exchanges were 176,240 (+100) lots.
Raw materials: Sheet rubber 63.27 (0), cup lump 45 (0), latex 63.5 (0), RSS3 67.86 (+0.49).
As of May 13, the domestic all-steel tire operating rate was 68.6% (+16.67%), and the domestic semi-steel tire operating rate was 64.73% (+9.43%).
Opinion: Yesterday, the price of rubber remained fluctuating within a narrow range. Following the sharp drop last week, the current price gap between spot and futures market has further narrowed. The latest port inventory continues to decline, mainly due to fewer arrivals. Due to the early overseas delivering stage, raw materials output is limited. At present, the supply at home and abroad is showing a different pattern. The main production areas in Hainan are abundant in raw materials, while in Yunnan, rubber trees have not been fully delivered and the supply of raw materials is limited, causing the prices of raw materials to continue to rise. However, Thailand has already started delivering, and the better phenological conditions have allowed the release of rubber to be normal, and the price of raw materials has fallen. However, the profits of overseas processing plants have been compressed, the enthusiasm for production has been hindered, and the supply side is intertwined with long and short. The domestic demand side is weaker than the previous month, and there is no more new positive support for rubber, leading more fluctuations in the short term.
Risks: production increases significantly, inventory continues to accumulate, and demand falls sharply, etc.
Crude oil: European demand continues to pick up, and diesel cracking spreads have strengthened significantly.
Recently, the crack spread of refined oil has continued to strengthen, especially the figure for European diesel oil to Brent. At the same time, we have also observed that the net long positions of European diesel funds have soared. We believe that this is not entirely due to the bullish boost brought about by the previous closure of the Colonial pipeline, but more driven by the rebound in European oil demand. In the past month, the traffic congestion index in Europe has continued to soar, and is currently back to around 80%. With the gradual lifting of travel restrictions in Europe, it is expected that European demand will improve further in the future. In addition, from the perspective of the supply side, as the Asia-Pacific and Middle East refineries were in a centralized overhaul period in April, diesel exports to Europe were significantly reduced, which is also one of the reasons for boosting European diesel prices. At present, the pattern of global refined oil products has shifted from strong gasoline and weak diesel to the reversed pattern of weak gasoline and strong diesel.
Copper: Spot transactions are still relatively sluggish.
In terms of spot: According to SMM, after the month change, holders try to narrow the discount to support the price. At the beginning of the morning market, flat copper was quoted at a discount of around 170 yuan/ton, and good copper was at a discount of around 80 yuan/ton. Jinchuan Company took the lead in bidding a premium of 90 yuan/ton for Jinchuan's large slaps, which led to a sharp increase of 1,000 yuan on the market. The discount was not expanded and reversely narrowed, causing the market was reluctant to accept. At nearly 10 o'clock, some holders took the lead in restarting the expansion of discounts. After the price discount of 190 yuan/ton was reported, the flat copper with a discount of 200 yuan/ton was exposed after the opening of the second period. At around 11 o'clock, when the market rushed straight to 76,000 yuan/ton, there was an outflow of 210 yuan/ton of flat copper premium. Good copper, Guixi and CCC-P have low resources and high prices, and the quotations rarely change. Jinchuan large slaps was finally adjusted to a discount of 110-100 yuan/ton, and ENM can have a premium up to 140-120 yuan/ton. Wet-process copper only has a small amount of ESOX with a discount of 240-220 yuan/ton. Bulgaria and DMK have increased their willingness to exchange spot due to the high market, and the discount can be as large as about 250 yuan/ton.
Opinion: Yesterday, US Treasury Secretary Yellen defended President Biden’s 2.2 trillion fiscal stimulus policy, which can reflect that the Biden administration is still working hard to implement various fiscal stimulus policies. This is the same for the overall non-ferrous sector. It is a relatively favorable factor. In terms of fundamentals, it was found yesterday that the situation of holders adjusting premiums and discounts to support price has eased. However, because copper prices are still relatively high and the enthusiasm for downstream purchases is still limited, it is necessary to focus on whether downstream purchases will be stimulated if prices fall behind in the near future. At the same time, look for buying opportunities when the price drops and the premium and discount quotations are correspondingly raised.
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: Crude oil promotes PTA cost-push increases.
Balance sheet outlook: Filament is gradually overhauled, and demand will be lowered from May to June; The market shifts to a small destocking in May, the destocking rate slowed down, and processing fees are expected to weaken; PX supply is still tight in May-June, pay attention to the support of oil adjustment demand for PX.
Strategic recommendations: (1) Unilateral: hold the current position (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, the strength of the negative feedback of the maintenance of polyester filament, and the sustainability of the improvement in the supply and demand of aromatics due to the gasoline premium.
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