Iron ore: Shipment volume and arrival volume have both decreased, and the relaxation of production restrictions is positive for the market.
Opinion and logic:
Yesterday, the iron ore open interest increased, while its price fluctuated upward throughout the day, and finally closed at 1,106 yuan/ton, an increase of 55.5 yuan/ton, or 5.28%. In terms of spot, the spot transactions at the port reported 1.165 million tons. Qingdao Port PB fine reported an increase of 61 yuan/ton to 1,383 yuan/ton , and SSF gained 55 yuan/ton to 1,013 yuan/ton. The price difference between high and low grades widened week-on-week.
This week, iron ore of China’s 45 ports totaled 23.073 million tons, a week-on-week drop of 6.1%. The total global shipment volume was 30.382 million tons, a week-on-week decrease of 2.942 million tons. The total shipment by Australia and Brazil was 23.729 million tons, a decrease of 2.673 million tons from the previous week. It was reported yesterday that Tangshan adjusted the daily emission reduction measures of steel enterprises. If the draft is implemented, the average daily molten iron output and the utilization rate of blast furnace capacity will be increased simultaneously, which will benefit iron ore and other charge materials.
Under the premise of limited production in Tangshan in the early stage and 30% of the production capacity has not yet been utilized, the overall supply and demand of iron ore are strong, while the inventory is accumulating at a low level. Yesterday, Tangshan held a symposium for steel companies to adjust the sintering machine's production restriction plan, which sent a signal to the market to relax emission control. Iron ore prices were boosted by this news and led the ferrous sector to increase. In the short term, Tangshan, which has the most stringent production restriction control in China, is expected to increase the supply of steel products nationwide after raising the signal of relaxation. The average daily molten iron output is expected to continue to rise on the basis of the current high level, which will greatly affect iron ore. Favorably, the price of iron ore is expected to operate on the strong side under the premise that it is facing a positive fundamental.
Unilateral: bullish in the short term
Cross-species: go long positions of iron ore and short positions of thread and hot-rolled coil
Spot-Futures Arbitrage: None
Concerns and risks:
1. Policies curb excessive speculation and suppress high prices of raw materials
2. decline in demand for thread and hot-rolled coil in the off-season
3. the epidemic might worsen.
Rubber: Overseas raw materials fell sharply, and rubber prices fell again.
On May 31, the most-active RU contract closed at 13,400 (-260) yuan/ton, the price of mixed rubber reported 12,200 (-150) yuan/ton, and the basis of most-active contract stood at -475 yuan/ton (-115); the open interest of top 20 actively traded long positions was 121,550 (+7,985) lots, the short position was 174,085 (+4,228) lots, and the net short position was 52,535 (-3,757) lots.
On May 31, the most-active NR contract closed at 10,815 (-215) yuan/ton, the STR in Qingdao Free Trade Zone reported 1,685 (-25) US dollars/ton, the SMR stood at 1,680 (-35) US dollars/ton, and the SIR figure was 1,635 (-140) US dollars/ton. The basis of most-active contract reported -403 (-69) yuan/ton.
As of May 28: the total inventory of domestic exchanges was 179,866 (+910) lots, and the amount of warehouse receipts of exchanges was 176,460 (-210) lots.
Raw materials: Sheet rubber 65.27 (0), cup lump 45.7 (-0.8), latex 59 (-4.5), RSS3 65.01 (-4.78).
As of May 27, the operating rate of domestic all-steel tire factories was 55.36% (-7.16%), and the operating rate of semi-steel tire factories was 56.22% (-4.76%).
Opinion: The sharp decline in the price of rubber in Thailand over the weekend led to a renewed weakness in the market price yesterday. The current drag on rubber prices is mainly in demand and spreads. Since the beginning of May, the operating rate of downstream tire factories has continued to fall, and finished product inventories have also begun to accumulate, mainly due to the decline in tire export demand and the weakening of domestic replacement demand. As a result, the non-standard price difference of Shanghai rubber is still at a relatively high level, which brings unabated pressure on market arbitrage. It is expected that under the expectation of an increase in supply in the later period, the price of rubber will maintain a weak trend.
Strategy: cautiously bearish
1. production increases sharply
2. inventory continues to accumulate
3. demand falls sharply
Crude oil: Iran said that the negotiations have made significant progress, but they have not yet been fully reached.
Yesterday Iran said that the negotiations have made significant progress, but Western countries have not made any relevant statements, and the negotiations have not yet been reached. According to Russian sources, the fifth round of negotiations will be the final round. If no agreement is reached in the end, it means that the negotiation will have to wait until after the Iranian election on June 18. From the perspective of the OPEC meeting, it is expected that OPEC will continue to implement its previous production increase plan, and the output in July is expected to increase by 840,000 barrels per day from the previous month. However, due to the undecided outcome of the current Iranian negotiations, it is unlikely that adjustments will be made to the output policy after August at this OPEC ministerial meeting. OPEC's relevant production decisions still require a clearer situation in Iran and a clearer demand recovery.
Copper: Holders' sentiment on supporting prices has revived.
Spot: According to SMM, yesterday was the last trading day in May, with no external guidance, the performance of Shanghai Copper stabilized. In the spot market, the next month contract completely dominates the market, and quotations remains firm. As the market steadily rises, the downstream has once again stopped to wait and see, and it is difficult to see a large amount of buying interest. Only a small number of traders implement rolling operation when the next month price difference is around 300 yuan/ton, supporting market transactions. However, market suppliers still showed a reluctance to sell and thus supporting the price, which led to a steady narrowing increase of market quotation discounts. In the morning market, Standard-Grade Copper began to report a discount of 80-70 yuan/ton for the next month contract, and some trade buying clearly led the market. After receiving the goods in the morning market, the holders raised their prices slightly to a discount of 60 yuan/ton, and even held a discount of 50 yuan/ton, in order not to sell, and the activity of trading has slowed down. High-Grade Copper returned to the supporting price sentiment after the supply of inflows was digested last week, opening up the price gap with Standard-Grade Copper. Except for the small discount of ENM, Guixi basically reported a premium ranging from 20-50 yuan/ton, but the market is still unable to accept the rhythm of premiums that have already occurred in June. There is a big difference in the differentiation between hydro-copper brands. Some MBs and Indian STs have flowed into the market to suppress prices, and the discount is around 160 yuan. However, if a small amount of ESOX is worth around 100 yuan discount, it is almost equivalent to the ISA price.
Opinion: Yesterday, as the United States’ Memorial Day, the financial market was closed, and overall fluctuations were relatively limited. However, the U.S. dollar is still showing a relatively weak pattern, which makes the trend of copper prices show a strong volatility at a high level. And it can be found that since the beginning of this week, the sentiment of supporting price of the holders who are reluctant to sell has reappeared. Therefore, in this context, copper prices may still maintain a strong volatility pattern at a high level. However, since the domestic willingness to regulate commodity prices still exists, it is also unlikely that there will be a too drastic increase in a short period of time.
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: go long positions on external market and short positions on internal market
3. Inter-period: postpone
4. Options: sell at out-of-value put options
1. The Fed's monetary policy orientation
2. The trend of the US dollar index
3. Whether the demand in the second quarter can meet expectations
4. Policy risks may intensify.
PTA: Overhauls increase, and processing costs are rising rapidly.
Balance sheet outlook: Under the background of the implementation of TA overhaul, the balance sheet in June showed a slight de-stocking state; the apparent accumulation period is still to be July, and TA processing fees are still acceptable in the short term; the accumulation rate of PX inventory from June to July is limited, and it is expected that PX processing fee compression space is limited.
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.
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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