Iron Ore: Market sentiment eased, and the spot price stopped falling and stabilized.
Opinion and logic:
Yesterday, the iron ore fluctuated in the morning session and rebounded slightly during the afternoon hours. The closing price of the iron ore 2109 contract was 1,139 yuan/ton, an increase of 18 yuan/ton, or 1.6%, from the closing price of the previous trading day, with the open interest losing 16,159 lots. In terms of spot, the spot market price stopped falling and stabilized yesterday, and some ports rose slightly in the afternoon. The PB fines of Qingdao Port reported 1,465 yuan/ton, an increase of 7 yuan/ton, and the PB fines of Tianjin Port stood at 1,470 yuan/ton, an increase of 5 yuan/ton. In terms of transactions, steel mills focused on just-needed purchases, traders were more willing to support price, and overall transactions were sluggish.
In terms of supply, judging from the latest iron ore shipment data, the global iron ore shipment volume and 45 ports of iron ore arrival volume both declined last week, and the global iron ore supply is still relatively stable. On the demand side, due to the off-season of steel consumption and local production restrictions, steel mills have increased their production shutdowns for maintenance. At the same time, the profits of long-process steel mills are now near the cost line, which has restrained iron ore prices and the demand for iron ore is expected to weaken.
Overall, affected by the recent macroeconomic policies, market sentiment has been in a state of hesitation, speculation has begun to cool down, and iron ore prices have also fluctuated widely. Downstream steel consumption has entered the seasonal off-season, coupled with the local production restriction policies, there is a high probability that subsequent domestic consumption will continue to shrink. On the other hand, the overseas epidemic situation has improved, the economy has recovered, and various economic indicators have continued to improve, prompting overseas iron ore consumption to remain relatively strong. In the medium and long term, the trend of iron ore prices is mainly affected by the production policy. If subsequent production restriction policies in various regions are implemented, iron ore demand will gradually weaken, and iron ore is likely to enter a state of surplus. However, before the production restriction policy is implemented, it is expected that the price of ore is still more likely to operate on the strong side. In short, there are more uncertainties on the policy side at present. We recommend that investors maintain a neutral wait-and-see attitude in the short term, and pay more attention to policy changes in the future.
Unilateral: hold a neutral wait-and-see attitude 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 downward trend of port inventory continues.
On June 22, the most-active RU contract closed at 12,670 (+65) yuan/ton, the price of mixed rubber reported 11,875 (+25) yuan/ton, and the basis of most-active contract stood at -320 yuan/ton (-165); the open interest of top 20 actively traded long positions was 120,877 (+1,734) lots, the short position was 168,443 (-553) lots, and the net short position was 47,566 (-2,287) lots.
On June 22, the most-active NR contract closed at 10,305 (+15) yuan/ton, the STR in Qingdao Free Trade Zone reported 1,655 (+5) US dollars/ton, the SMR stood at 1,645 (+10) US dollars/ton, and the SIR figure was 1,605 (+10) US dollars/ton. The basis of most-active contract reported -170 (+94) yuan/ton.
As of June 11: the total inventory of domestic exchanges was 182,604 (+1,029) lots, and the amount of warehouse receipts of exchanges was 174,630 (-810) lots.
Raw materials: Sheet rubber 56.56 (-0.11), cup lump 42.3 (+0.1), latex 49.5 (0), RSS3 59 (-0.11).
As of June 11, the operating rate of domestic all-steel tire factories was 56.92% (-5.39%), and the operating rate of semi-steel tire factories was 52.75 (-5.91%).
Opinion: Yesterday, the price of raw materials in Thailand's main producing areas continued to be weak, and the recent continuous decline in raw material prices has increased the drag on the cost of rubber. The latest domestic port inventory continues to decline, mainly due to the small arrivals. Judging from the production data of Thailand and other countries, the cumulative data rebounded year-on-year, but the import volume has slowed down. This may be mainly due to the delayed import volume caused by the increase in ocean freight prices. The increase in the supply side and the weakening of demand from the previous week have made the supply and demand pattern of rubber loose, and the non-standard spread has continued to narrow. However, the recent contraction has slowed down, which may confirm the weakness of spot prices. Although the absolute price is at a low level, it is expected that rubber prices will continue to be weak due to weak supply and demand drivers.
Strategy: cautiously bearish
Risk points: production may increase sharply, inventory may continue to accumulate, and demand may fall sharply.
Crude oil: WTI Cushing's premium rose significantly.
Yesterday API announced inventory data, among which US crude oil inventories continued to fall sharply. It is worth noting that the recent inter-month spread of WTI crude oil has been very strong, and the nearest spread has risen to more than $1 per barrel. And yesterday was the last trading day of the WTI July contract, such increase in the inter-month spread is equivalent to a significant spot premium. At the same time, the spread of WTI cushing to other regions is also significantly higher, regardless of the spread to Midland, where it is produced, or the spread to MEH in the U.S. Gulf. This shows that the current market is increasingly worried that Cushing's local inventory destocking may cause Cushing to reach the lower limit of reserves soon in the future, which will cause long positions to increase their open interest significantly, and the current possibility is obviously increasing.
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 tapering volume have been set, and copper prices stabilized and rebounded.
In terms of spot: According to SMM news, the Shanghai copper market rebounded slightly yesterday. After experiencing long-term losses, the Shanghai-London copper ratio has been restored to 7.32 in recent days, and the import loss has narrowed significantly. Yesterday's active Yangshan copper market caused domestic trade holders to rush to sell for spot exchange when the premium showed signs of rapid decline. In addition, coupled with the rebound of the market price above 67,000 yuan/ton, the downstream buying is hard to see a boost, the market trading has returned to a wait-and-see attitude, and the quotation has been panicked to plummet. Standard-Grade Copper initially reported a premium of 110 yuan/ton to test the market sentiment, but few downstream receivers accepted the quotation; the holders quickly started a price reduction trend, and soon the quotation fell within the premium of 100 yuan/ton, and the quotation at the end of the first period has been around a premium of 60-70 yuan/ton. After the second period, the urgency of the holders to dump the goods has become clear. The premium of 50-60 yuan/ton has become the normal range. In the late trading, there was even a source of premium of 40 yuan/ton that had flowed out. High-Grade Copper continues to seize and squeeze the Standard-Grade Coppermarket yesterday. With the continuous outflow of Guixi-Copper warehouse receipts, the premium has been reduced since the morning market, from a premium of 120 yuan/ton to 60-70 yuan/ton in the morning market. Although Hydro-Copper follows the general market trend, the actual reduction rate is not as high as that of Standard-Grade Copper. The premium is 30-40 yuan/ton in the morning market and reported to the near the level of Standard-Grade Copper. Only a few brands such as BMK can offer a discount of 10 yuan/ton. However, the price differences between buyers and sellers still exist, and the overall trading activity is still not as good as that of Standard-Grade Copper.
Opinion: Yesterday, the specific quantity of tapering has been given, and copper varieties will taper 20,000 tons of reserves from July 5th to 6th. However, such a quantity is actually very limited, so copper prices have stabilized and rebounded. In addition, the Fed Chairman Powell's speech early this morning did not show too many hawkish views, and was even interpreted as relatively dovish by the market. Therefore, the US dollar index maintains a weak pattern, and these factors are conducive to the continued volatility and recovery of copper prices. It is expected that copper prices will continue to be dominated by shocks in the near future.
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 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 increase.
PTA: In July, Yisheng Hengli continued to reduce contract volume, and PTA processing fees rose rapidly.
Balance sheet outlook: Under the background of the implementation of TA overhaul, the accumulating rate in July is relatively controllable, 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
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