Iron ore: The production restriction policy has repeatedly disturbed the market, and iron ore fell first, then rose, and then fell again.
Last week, market rumors: the national production restriction policy is expected to be implemented, and in the second half of the week it is rumored that Tangshan production restriction will be relaxed. Although there was no official document, it was fully traded by the market. Iron ore futures fell first and then rose again, and finally closed above 1,200 points. In terms of futures, as of the close of last Friday, the most-active iron ore 2109 contract closed at 1,203 points, down 44 points on a week-on-week basis. In terms of spot, last Friday, the lowest price Qingdao PB fines at Qingdao, Beijing and Cao reported at 1,502, a weekly increase of 48; JMBF reported 1,327, a weekly increase of 32, and Carajás iron ore fines (SFCJ) reported 1,747, a weekly increase of 74; The Platts 62% index reported US$221/ton, an increase of US$4/ton on a weekly basis. In terms of basis, the PB fines 09 contract reported 439, a weekly increase of 7 week-on-week; in terms of transactions, last week’s iron ore main port had an average weekly turnover of 1.11 million tons, a week-on-week increase of 13. This set a new high in recent weeks and is at a historical median level.
On the supply side, according to Mysteel statistics, Australia and Brazil shipped 26.135 million tons of iron ore, an increase of 1.111 million tons from the previous week; Australia’s total shipments were 18.499 million tons, an increase of 1.622 million tons from the previous week; of which, Australia sent 15.506 million tons to China, a week-on-week increase of 1.596 million tons; the total shipment from Brazil was 7.636 million tons, a decrease of 511,000 tons from the previous week. The total global shipment volume was 32.059 million tons, an increase of 1.106 million tons from the previous week. The overall shipment volume from overseas on the supply side increased slightly, and there was no significant change on the iron ore supply side.
In terms of demand, Mysteel surveyed 247 steel mills with a blast furnace operating rate of 80.21%, a decrease of 0.13% from last week and a year-on-year decrease of 11.33%; the blast furnace ironmaking capacity utilization rate was 91.67%, a week-on-week decrease of 0.02%, and a year-on-year decrease of 0.98%; the profit rate of steel mills was 86.15%, an increase of 0.43% week-on-week and a year-on-year decrease of 9.09%; the average daily molten iron output was 2.4401 million tons, a week-on-week decrease of 500 tons, and a year-on-year decrease of 26,200 tons. Mysteel surveyed 163 steel mills with a blast furnace operating rate of 61.19%, a decrease of 0.55% week-on-week; a capacity utilization rate of 73.26%, a week-on-week decrease of 0.86%; a utilization rate excluding the eliminated capacity was 79.76%, down 6.42% from the same period last year; the profit rate of steel mills was 76.69%, an increase of 0.61% week-on-week. The national production restriction policy has not been implemented. Although the current operating rate has contracted, it is still at a high level, which will form a strong support for iron ore prices in the short term.
In terms of inventory, Mysteel counted that the imported iron ore inventory of 45 ports across the country was 12,088.75, a week-on-week decrease of 278.42; the average daily port congestion volume of 300.53, a week-on-week increase of 2.24. Australian iron ore reported 6,211.71, a week-on-week decrease of 106.66; Brazil figure reported 3,483.65, a week-on-week decrease of 196.17; trade ore reported 6,328.60, a week-on-week decrease of 116.4; pellets reported 376.53, an increase of 4.25 week-on-week; iron ore concentrates reported 878.78, an increase of 19.07 week-on-week; lumps reported 1,727.66, a week-on-week decrease of 17.94; coarse fines reported 9,105.78, a week-on-week decrease of 283.8; the number of ships in port reported 145, a month-on-month increase of 3. Although it is in the off-season, under the strong pull up of high operating rate and high output of steel, iron ore inventory has not yet accumulated, and it has dropped 2.78 million tons on a weekly basis, which will provide favorable support for iron ore prices in the later period.
On the whole, because the production restriction policy has not yet been implemented, the supply of raw materials has continued to grow, and consumption has risen to a high level, forming a good trend of rising iron ore prices. In the medium and long term, the trend of iron ore will depend more on the policy direction. Production restriction policies still suppress the raw materials. If the government restricts production at a moderate level, the prices of thread and hot-rolled coil and iron ores will both rise; if the government severely restricts production, coupled with high basis and high valuation of the spot, the market price will inevitably face a correction. Before the production restriction policy is actually implemented, iron ore prices will remain strong. The future price of iron ore will depend on the intensity and implementation time of industrial policies.
Unilateral: cautiously bullish in the short term
Spot-Futures Arbitrage: None
Concerns and risks: the intensity and policy orientation of the production restriction at the thread and hot-rolled coil end, the off-season demand performance at the thread and hot-rolled coil end, and the worsening of the epidemic, etc.
Rubber: The demand is weak, and the price rebound is limited.
The price of rubber futures fluctuated within a narrow range last week. The price rebounded slightly after RU hit 12,500 yuan/ton. Rubber's overall price rebound is weak due to its weak fundamentals.
The total inventory of domestic exchanges as of June 18 was 182,604 tons (+1029), and the amount of futures warehouse receipts was 174,630 tons (-810). As the price of rubber continues to fall, warehouse receipts have been flowing out in the past two weeks. As of June 8, the inventory in Qingdao Free Trade Zone continued to fall slightly, which was still caused by the decrease in the inventory.
Last week, the spot price was weak and maintained fluctuating, and the price center did not change much from the previous week. According to Zhuo Chuang's understanding, although the new release of rubber volume is not smooth due to the rainy season in the domestic production areas, the demand side performance is weak, and the tire export market is under pressure with high freight rates and tight containers, resulting in greater pressure on the company's finished product inventory. Therefore, from the perspective of supply and demand fundamentals, the overall performance of market trading is deserted due to the lack of profitability, and the terminal end only purchase for just-need. U.S. dollar spot quotations followed this decline. Due to the weak market, the downstream buying and purchasing intentions were not strong, resulting in sluggish spot trading and only sporadic negotiations. The main reason for the decline in US dollar cargo during the week was the release of raw materials from the supply side of foreign production areas, while domestic order demand was weak, and the supply-demand mismatch resulted in a bearish situation, which made US dollar cargo transactions sluggish. As of last weekend, the rubber premium was 150 yuan/ton (-225) for synthetic rubber. The rebound in the price of SBR last week narrowed the spread.
In terms of downstream tire operating rate, as of June 17, the operating rate of all-steel tire companies was 56.92% (-5.39%), and the operating rate of semi-steel tire companies was 52.75 (-5.91%). The operating rate dropped again last week, mainly due to the overhaul of some manufacturers' installations and obstructed exports.
Opinion: Last week, the price of Shanghai rubber continued to hit new lows, and the non-standard spreads also narrowed, but the narrowing range was limited, or it may reflect the still weak spot prices. Due to the maintenance of some manufacturers and the obstruction of exports, the operating rate of tire factories continued to decline last week, bringing expectations of further weakening in demand for raw materials. The exchange warehouse receipts continued to decline last week, and the pressure on market arbitrage has eased, which may bring stability to the market in the short term. From the perspective of fundamentals in the later period, domestic production will gradually pick up, and major overseas production areas will also enter the peak season. In the short term, attention may be paid to the possibility of slowing imports caused by the continuous increase in ocean freight. Domestic imports have dropped significantly in May, and if it continues to affect the reduction of domestic port stocks in the later period, it may bring about short-term price fluctuations. Demand is in the off-season, domestic demand has weakened from the previous week. The expectation of a decline in exports due to container tensions is increasing. Given the weak mid-term supply and demand expectations, it is expected that rubber prices will continue to fluctuate and weaken. Short-term prices are expected to stabilize with the non-standard spreads being small.
Risk points: Domestic supply increases sharply, demand continues to weaken due to the epidemic and other impacts, and funding might be tight.
Crude oil: The Iranian nuclear talks returned to a turning point, and the oil price went back at a high level.
Last week, there was a slight correction in oil prices from a high level. The main driving force was two points: On the one hand, the Iranian nuclear talks have reversed again, and both the United States and Iran have said that the talks have made progress. But so far, the agreement has not been reached, the Iranian government has changed, and the hardline leader Lacey has been elected, which has brought uncertainty to subsequent negotiations. On the other hand, the overall decision-making of the Fed's meeting on interest rates is biased towards hawks. Given the upward pressure on inflation, monetary policy may tighten in the future, and macro sentiment will suppress the price trend of risky assets. However, we believe that the current increase in crude oil prices is still supported by strong fundamental logic. This is mainly reflected in the recent strengthening of the inter-month spread of crude oil and of the physical discounts, and the trend that supply growth has not kept up with demand recovery continues.
We believe that in addition to the Iran nuclear talks, the recent focus of attention that affects the market is focused on the following two points: 1. Saudi Arabia's production increase plan after August; 2. China's second batch of crude oil import quotas.
First discuss the Saudi side. Since no news or signals were disclosed at the June 1 meeting, the market is currently speculating on Saudi or OPEC’s next production increase plan. Because the current plan is only in August, this also means that OPEC must give answers to the production limit plan after August at the July meeting, and the magnitude and pace of the increase in production are the focus of the current market. At present, OECD oil inventories are already below the 5-year average level. Therefore, OPEC has a very good reason for increasing production, but the key to the problem is how to strike a balance between price and output, in other words, OPEC’s upper limit of tolerance for current oil prices. It is also worth noting that there are not many countries in the current production-limitation alliance that can substantially increase production. They are mainly concentrated in the three countries of Saudi Arabia, Russia, and Iraq. How to balance their differences is also worth paying attention to. At present, OPEC has nearly 5.8 million barrels of surplus production capacity on hand, which still has a huge influence on future oil prices.
The second is China's crude oil import quota. Compared with the issuance time in April last year, the issuance of the second batch of import quotas this year was significantly later. And according to foreign media sources, due to the recent inspections by the National Development and Reform Commission and the Ministry of Commerce on issues related to import quotas for local refining and reselling, the second batch of crude oil import quotas is likely to shrink, or some quotas may be delayed. Recently, due to the tight crude oil quota and the addition of a consumption tax on diluted bitumen, some refineries have begun to increase the import of straight-run fuel oil. However, we believe that even the reduction of quotas will not significantly curb the growth of China's crude oil imports. On the one hand, the profits of domestic refineries are relatively good, especially after the implementation of the consumption tax policy, the price of refined oil has been pushed up. The refinery has a strong willingness to start construction after the spring inspection, and the interest in purchasing crude oil has also increased significantly in the near future. We noticed that Rongsheng continued to issue tenders on the spot market to purchase large quantities of crude oil. On the other hand, although the pace of importing crude oil by private refineries will be affected by the pace and quantity of import quotas, the main business is excluded, and the consumption tax policy is more favorable to the main refineries. Therefore, the interest of PetroChina, Sinopec, and CNOOC to import crude oil will be significantly stronger than that of private refineries. Moreover, Shenghong plans to start production in August this year, and the rigid demand for large refining and chemical projects to start production will also support the recovery of China's crude oil imports. We believe that China's crude oil imports in May have fallen to the lowest point of the year, and imports will continue to grow in the future.
Strategy: neutrally, tend to be bullish in the short term; go long positions of crude oil
Risk: The Iran nuclear agreement reaches quickly or a black swan event appears in the epidemic.
Copper: The US dollar strengthened sharply, and copper prices were under pressure.
According to SMM news, the average price of SMM1# electrolytic copper in the week of June 18 was between 67,780 yuan/ton and 70,760 yuan/ton, and the average premium and discount price of Standard-Grade Copper was between 40 yuan/ton and 155 yuan/ton. Last week, copper prices fell sharply, but the market premium and discount quotations continued to rise. After the price fell, spot transactions resumed. Since then, copper prices may fall into a shock pattern.
Last week, on the macro front, the Fed announced the results of its June meeting on interest rates. Although its hawkish views are not very strong, the Fed officials have shown more-than-expected optimism about the future economic outlook, which has made the U.S. dollar index strengthened sharply, while copper and other products with relatively strong financial attributes have been severely suppressed. In addition, last week's news about the US tapering finally landed, which also had a certain inhibitory effect on copper prices. Therefore, the current short-term operation is mainly based on a wait-and-see attitude, and it is expected that the copper price will maintain a volatile pattern between 66,000 and 70,000 yuan/ton for a period of time.
Medium and long term:
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. However, due to the current market interference from the rumors of the Federal Reserve tapering and the possible tightening of central bank liquidity around the world, in general, we recommend that investors maintain a relatively neutral attitude.
1. Unilateral: neutrally
2. Inter-market: postpone
3. Inter-period: postpone
4. Options: postpone
1. The risk of tightening liquidity
2. Domestic delivery situation
3. Destocking in the second quarter fell short of expectations.
PTA: TA processing fees are still relatively strong, and we are concerned about the progress of new installations.
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：暂缓 3. 跨期：暂缓；4. 期权：暂缓
1. 流动性收紧的风险 2. 国内交仓情况 3. 2季度去库不及预期