Iron ore: Ferrous sector fell collectively, led by iron ore futures.
Opinion and logic:
Yesterday, the open interest of iron ore decreased. As of the close, the iron ore 2109 contract closed at 1,118 yuan/ton, down 50.5 yuan/ton from the previous day. In terms of spot, the national port spot transaction volume was 645,000 tons, a decrease of 27.2% from the previous day. Qingdao port iron ore prices fell 15-33 throughout the day, PB fine decreased by 25 to 1,400, PB block fell by 15 to 1,825, Carajas fine drop by 20 to 1,740, SSF down 27 to 1,013, and Yangdi fine stood at 1,130 with a decrease of 33.
Mysteel news: Australia and Brazil shipped a total of 25.024 million tons of iron ore, an increase of 1.295 million tons from the previous day; Australia’s total shipment was 16.877 million tons, an increase of 56 thousand tons from yesterday; of which, Australia shipped 13.910 million tons to China, an increase of 1.026 million tons from the previous day; Brazil’s total shipments amounted to 8.147 million tons, an increase of 1.239 million tons from the previous day. The total global shipment volume was 30.953 million tons, an increase of 571,000 tons from the previous day. The total arrivals in 45 ports in China was 20.503 million tons, a decrease of 2.57 million tons from the previous day; the total arrivals of the six northern ports was 9.559 million tons, a decrease of 1.095 million tons from the previous day.
According to data from the General Administration of Customs on June 7, 2021, China exported 5.271 million tons of steel products in May 2021, a year-on-year increase of 19.8%; from January to May, China’s cumulative steel exports were 30.924 million tons, a year-on-year increase of 23.7%. In May, China imported 1.206 million tons of steel, a year-on-year decrease of 5.8%; from January to May, China’s cumulative steel imports were 6.097 million tons, an increase of 11.6% year-on-year. In May, China imported 89.79 million tons of iron ore and its concentrate, a year-on-year increase of 3.2%; from January to May, China’s cumulative import of iron ore and its concentrate was 471.765 million tons, a year-on-year increase of 6.0%.
On the whole, on the supply side, last week’s shipment data has increased significantly, domestic ores are also actively increasing production, and iron ore supply side has not changed significantly. On the demand side, the overall market sentiment is sluggish due to the news of national restrictions on steel production. In the medium and long term, the anticipation of suppressing the raw material end by the production restriction policy still exists. Once the policy is implemented, there is a high probability that iron ore will enter a state of surplus. Coupled with the approaching off-season,this will also affect expectations. However, based on the current situation of high basis, the high valuation spot will inevitably fall. In the short term, due to policy disturbances, it is still recommended to take a wait-and-see attitude.
Unilateral: neutrally hold the current positions in the short term
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 exceeds expectations by a large margin.
Rubber: The price of raw materials witnessed a mix of gains and losses, and the futures prices remained weak.
On June 7, the most-active RU contract closed at 13,070 (-295) yuan/ton, the price of mixed rubber reported 12,150 (-100) yuan/ton, and the basis of most-active contract stood at -395 yuan/ton (+145); the open interest of top 20 actively traded long positions was 125,376 (+4,381) lots, the short position was 180,239 (+7,937) lots, and the net short position was 54,863 (-3,556) lots.
On June 7, the most-active NR contract closed at 10,670 (-205) yuan/ton, the STR in Qingdao Free Trade Zone reported 1,705 (0) US dollars/ton, the SMR stood at 1,685 (0) US dollars/ton, and the SIR figure was 1,645 (0) US dollars/ton. The basis of most-active contract reported -148 (+187) yuan/ton.
As of June 4: the total inventory of domestic exchanges was 181,264 (+1,398) lots, and the amount of warehouse receipts of exchanges was 176,150 (-310) lots.
Raw materials: Sheet rubber 62.42 (-0.33), cup lump 44.5 (+0.5), latex 53.5 (0), RSS3 64.8 (+0.03).
As of June 4, the operating rate of domestic all-steel tire factories was 60.46% (+5.1%), and the operating rate of semi-steel tire factories was 59.98% (+3.8%).
Opinion: Yesterday, the market price of futures remained weak. Driven by weaker demand, the prices of overseas raw materials continued to fall, but they stopped falling yesterday. At present, overseas is in the early stage of delivery, and the raw materials have not yet reached the peak production stage. Domestically, because the main production area in Yunnan is about to usher in full-scale delivery, the supply is expected to increase. Short-term domestic demand has weakened compared to the previous month, and overall supply and demand have been weak. As futures prices continue to fall, the current RU non-standard spread has narrowed to less than 1,000 yuan/ton. It is expected that the pressure on market hedging will gradually ease, and prices may fluctuate mainly at low levels.
1. Production increases substantially
2. Inventory accumulates substantially
3. Demand drops significantly
Crude oil: Iranian nuclear talks resumed this week, but reaching an agreement may be difficult.
The new round of Iran’s nuclear negotiations will resume on June 10, which means that there is only about one week left before the Iranian presidential election. It is very difficult to reach an agreement in such a short time window. And if it cannot be reached before the Iranian election, when the hardline leader is elected president, it will bring new uncertainty to future Iranian nuclear negotiations, which will delay the lifting of Iran’s sanctions and the return of oil to the market. This will make the oil market supply inelastic, and only OPEC can increase production substantially in the short term. Therefore, once the Iranian negotiation situation becomes clear, OPEC's tolerance ceiling for oil prices is very critical. In terms of time, the production increase plan from August will also be made at the meeting in early July at the earliest. This means that the possibility of excessive tightening in the short-term oil market will increase significantly. With the arrival of the peak travel season, it is expected that global inventories will accelerate their destocking.
Strategy: neutrally, tend to be bullish in the short term; go long positions of crude oil
Risk: The Iranian nuclear agreement might be reached before June 18 or a black swan event appears in the epidemic.
Copper: Supply and demand may rebound together, and copper prices are expected to maintain a volatile pattern.
Spot situation: According to SMM, there are only 5 trading days left before delivery, and the fluctuation of the inter-month spread has narrowed significantly compared with the previous week, which has affected the overall trading activity of the market. In the morning market, the inter-month spread was still fluctuating in the range of 200-220 yuan/ton. Therefore, the holders began to test the market by reporting a premium of 100-110 yuan/ton in Standard-Grade Copper. However, the instability of the market's rising trend made downstream buyers resist high premiums and were reluctant to buy. In addition, the narrowing of the inter-month basis has suppressed the arbitrage space of traders, and thus the trading. Until some holders took the initiative to adjust the price to a premium of 80-90 yuan/ton, the market transaction showed a slight recovery, and there was a low-priced source of a premium of 70 yuan/ton. High-Grade Copper’s quotation stabilized at a premium of 100-130 yuan/ton, while Guixi Copper reported a premium of 130-150 yuan/ton. However, the quotation has already exceeded the delivery price, therefore the market favors are limited. Under the price guidance of ST and other brands, the market price for Hydro-Copper reported between the price of Standard-Grade Copper and a premium of 30 yuan/ton. However, downstream consumers have difficulty accepting the premium price of Hydro-Copper, and the market did not witness a large number of transactions.
Opinion: Yesterday, market volatility was relatively limited, the US dollar fell below the 90 mark again, and copper prices fluctuated and rebounded slightly. What the market is most concerned about right now is the May CPI data for the United States that will be released this Thursday. In terms of fundamentals, the current supply-side pressure on prices may gradually appear. The rebound in TC prices and the gradual flow of copper scrap may inhibit the upward trend of copper prices. But on the other hand, since it is the peak consumption season, if the copper price drops, it will also stimulate the previously suppressed demand due to high prices. This will also support the copper price, so it is expected that the copper price will still maintain a pattern of fluctuating at high levels.
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: neutrally
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: Processing fees fell after experiencing over-increasing.
Balance sheet outlook: Under the background of the implementation of TA overhaul, the balance sheet in June continued to be de-stocked; 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.
1. 单边：中性 2. 跨市：多外盘 空内盘 3. 跨期：暂缓；4. 期权：卖出看跌
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