Iron ore: The spot and futures prices of ferrous metal soared across the board, and iron ore prices were running on the strong side.
Opinion and logic:
Yesterday, the most-active iron ore contracts rose close to the daily limit, closing at 1,225 yuan/ton, up 64 yuan/ton, or 5.51%. Spot prices generally rose, Qingdao Port PB fines reported 1,520 yuan/ton, up 20 yuan/ton, SSF reported 1,077 yuan/ton, up 22 yuan/ton, and the spread between high and low grade products was 443 yuan/ton. The main ports traded 1.038 million tons yesterday, a decrease of 2.5% from the previous week.
On the whole, the domestic and international supply and demand of iron ore have been in a tight balance since the beginning of this year, supporting the strong operation of iron ore prices all the way. The stable pig iron output in the first half of the year and the recovery of the overseas economy contributed to strong consumption of iron ore. If the consumption of iron ore at the raw material end cannot be restrained, the imbalance will continue. Yesterday, most of the steel companies in Tangshan resumed production of blast furnaces and began to implement the 30% production limit policy from July 2 to December 31. With the implementation of Tangshan's production restriction policy, the iron ore market was in high mood yesterday, but once the production restriction deepens, iron ore consumption is bound to be substantially suppressed. Looking ahead, the national policy of restricting crude steel production is still the core factor determining the direction of iron ore prices. If the plan to reduce crude steel throughout the year is strictly implemented, iron ore inventories are expected to continue to accumulate, and the supply and demand pattern will gradually turn into an oversupply. The iron ore price in the second half of the year is expected to run weakly.
Unilateral: tend to be bullish in the short term; under pressure in the medium term
Spot-Futures Arbitrage: None
Concerns and risks:
1. The implementation of the policy of limiting production at the thread and hot-rolled coil end;
2. Domestic and overseas steel demand may weaken at the same time;
3. Iron ore shipments, etc.
Rubber: The Short significantly decreased their current holding positions, and futures prices rebounded.
On July 5, the most-active RU contract closed at 13,160 (+455) yuan/ton, the price of mixed rubber reported 11,925 (+200) yuan/ton, and the basis of most-active contract stood at -410 yuan/ton (-80); the open interest of top 20 actively traded long positions was 114,072 (-3,675) lots, the short position was 158,336 (-10,489) lots, and the net short position was 44,264 (+6,814) lots.
On July 5, the most-active NR contract closed at 10,690 (+385) yuan/ton, the STR in Qingdao Free Trade Zone reported 1,650 (+35) US dollars/ton, the SMR stood at 1,640 (+35) US dollars/ton, and the SIR figure was 1,605 (+30) US dollars/ton. The basis of most-active contract reported -306 (-194) yuan/ton.
As of Jul 2: the total inventory of domestic exchanges was 184,286 (+752) lots, and the amount of warehouse receipts of exchanges was 174,650 (-170) lots.
Raw materials: Sheet rubber 52.19 (+0.3), cup lump 41.65 (0), latex 42.5 (-2), RSS3 53.55 (+0.5).
As of Jul 1, the operating rate of domestic all-steel tire factories was 45.28% (-18.85%), and the operating rate of semi-steel tire factories was 44.75% (-14.2%).
Opinion: Yesterday, the rubber futures price rebounded significantly after the short significantly decreased their current holding positions. From a fundamental point of view, with the end of the 100th anniversary celebration in China, it is expected that the tire plant operating rate will rebound again this week. At the same time, the narrowing of the RU non-standard spread also slowed down the market's hedging short power. The resurgence of the epidemic in Ruili, the main production area in Yunnan, yesterday also triggered the market’s postponement of future market expectations for the entry of index rubber into the country. The above factors have jointly promoted the upswing of market prices. Yesterday, the price of raw materials in Thailand's main producing areas presented a mix of gains and losses, but the price of rubber remained stable, which may reflect the abundant supply of raw materials. The loose fundamentals of the rubber market have not been improved, and the rebound is expected to be limited. It is recommended that short-term operation is appropriate.
Risk points: production may increase sharply, inventory may continue to accumulate, and demand may fall sharply.
Crude oil: The UAE has not yet compromised, and the implementation of OPEC's production increase has reached a deadlock.
As the UAE insisted on its request for baseline adjustment on Monday, it was still unable to reach a compromise with Saudi Arabia. From the Saudi perspective, once a higher production quota is given to the UAE, it means that other countries will also express relevant demands, which is equivalent to the invalidation of the production restriction agreement. At present, because there is no new consensus on limiting production, OPEC's production will continue at the level of July, and there will be no increase in production in August. Unless a new agreement is reached, the probability of oil prices soaring to $80/barrel will increase substantially. At present, the mediation of other countries such as the United States, Kuwait, and Russia is very critical. We believe that OPEC may still hold a new meeting around the end of August to discuss production restrictions. The current OPEC production impasse has increased the risk of excessive tightening of the oil market in the short term. The continued enlargement of the gap between supply and demand will further increase the speed of inventory destocking.
Strategy: neutrally, tend to be bullish in the short term; go long positions of INE crude oil and short positions of Brent or WTI futures
Risks: The Iranian nuclear agreement may be reached quickly or OPEC may increase production beyond expectations.
Copper: In the case of strong oil prices, copper prices fluctuated upward.
Spot: According to SMM, yesterday's spot market quotations rose first and then fell. In the morning market, when there were not many sources of market flow, some holders reported a premium of 180-190 yuan/ton, which made the market transactions more active. However, as market prices continue to rise, coupled with the continued outflow of supply held by some holders, market quotations have fallen all the way down. Before the second period, the premium price stood at 160-170 yuan/ton, and the buying power of the market weakened, and most participants held a wait-and-see attitude. It wasn't until after the second period that there was a supply with a premium price of 150 yuan per ton, the buying interest picked up slightly. In the late trading, there was even an offer with a premium of 140 yuan/ton. In the morning market, due to the influence of Standard-Grade Copper, the price of High-Grade Copper began to report at a premium of 200-210 yuan/ton, but the market favor is still limited. As the quotations of Standard-Grade Copper continued to fall, High-Grade Copper had reported a premium of 170 yuan/ton in late trading, but there were still few large transactions. The overall supply of Hydro-Copper is still tight. Under the guidance of individual brands such as BMK, the price is quoted to a premium of 80-100 yuan/ton. However, as market prices continued to rise, the downstream was unwilling to buy at high premium prices, and it was difficult for buyers and sellers to reach a consensus.
Opinion: Yesterday was the US Independence Day, and market trading was relatively poor. Driven by the strengthening of crude oil prices, and affected by the positive feedback of inflation expectations, copper prices have also shown a trend of fluctuating upward. In terms of fundamentals, the current TC price continues to rise, coupled with the impact of tapering and the gradual influx of scrap copper, the supply side is gradually biased towards ample supply. But from the demand side, demand that was previously suppressed due to high prices has also recovered when copper prices have fallen. Therefore, for the current copper price, it may still maintain a volatile pattern.
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: Xinfengming's overhaul has been implemented, and the game between the Long and Short of the 09 contracts has intensified.
Balance sheet outlook: Balance sheet outlook: If TA overhauls are only partially implemented, there will be a turning point in inventory accumulation in mid-to-late July. If TA overhauls are fully implemented, the inventory will continue to accumulate in July, and the inflection point may be postponed again. The accumulation rate of PX inventory in July is limited, and it is expected that the space for compression of PX processing fees is limited.
Strategic recommendations: (1) Unilateral: cautiously bullish (2) Intertemporal: The 09 contract holdings are much larger than the deliverable inventory, and there is greater emotional uncertainty. Therefor, it is recommended to take a wait-and-see attitude. The inflection point of the inventory accumulation is postponed to late July or early August, as the open interest of 09 contracts gradually fall, the 9-1 spread may gradually peak and then fall.
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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