Iron ore: the price of thread and hot-rolled coil rose sharply, and iron ore followed its upward trend.
Opinion and logic:
In terms of spot, traders were less motivated to offer prices in the morning trading session, and some varieties rose by 5-10 yuan/ton in the afternoon. There were few inquiries from steel mills, and they only replenished inventory in a targeted manner. Suppose that some traders had obvious reluctance to sell, so that the spot transactions throughout the day were mostly rigid demand, speculative sentiment was poor, and overall transactions are relatively small.
In terms of futures, the most-active contracts of Liantie fluctuated around the 1250 price level yesterday. Due to the more prominent structural contradictions in iron ore, coupled with policy controls, iron ore trading sentiment has weakened, and the open interest of most-active contracts have shown a trend of decreasing.
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. Looking ahead, the national crude steel production limit for the whole year is expected to come back. Once the production restriction starts, the supply of scrap steel will decrease simultaneously, and the molten iron needs to make up for the missing part of the scrap steel. The price direction of iron ore depends on the intensity of domestic production restrictions. If the intensity of production restriction is small, due to the current tight global supply and demand of iron ore, the price is likely to continue to run on the strong side. If the crude steel production restrictions are greater, iron ore stocks are expected to continue to accumulate. Therefore, the supply and demand pattern will gradually turn into an oversupply, and subsequent prices are 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: Due to weak demand, the price of latex in Thailand has dropped significantly.
On July 7, the most-active RU contract closed at 13,415 (+35) yuan/ton, the price of mixed rubber reported 12,075 (0) yuan/ton, and the basis of most-active contract stood at -540 yuan/ton (-85); the open interest of top 20 actively traded long positions was 111,152 (+1,576) lots, the short position was 156,309 (-3,186) lots, and the net short position was 45,157 (-4,762) lots.
On July 7, the most-active NR contract closed at 10,825 (-5) yuan/ton, the STR in Qingdao Free Trade Zone reported 1,655 (-10) US dollars/ton, the SMR stood at 1,645 (-5) US dollars/ton, and the SIR figure was 1,605 (-10) US dollars/ton. The basis of most-active contract reported -431 (-36) 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 52.10 (-0.6), cup lump 42.7 (+0.5), latex 42.5 (0), RSS3 53.82 (-0.78).
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, rubber futures prices continued to rebound, and the domestic RU market price has risen above the domestic raw material cost price. Due to the recent decline in demand for Thai latex, the price has dropped significantly. Its current price has fallen below the price of cup lump, and its absolute price has also been at a year-on-year low in the past five years. As the market price rebounded, the RU non-standard spread rose again this week. The loose fundamentals of rubber market have not improved significantly, and the current rebound may be due to the weakening of market short forces and low valuations. However, the supply and demand drive is still weak, and the current rebound must be treated with caution.
Risk points: production may increase sharply, inventory may continue to accumulate, and demand may fall sharply.
Crude oil: API crude oil inventories continued to decline.
Oil prices continued to fall yesterday, but neither API inventory data nor EIA monthly report data showed significant negative factors. Especially with API inventory data, crude oil inventories still fell more than expected. The current crude oil fundamentals are still relatively strong, and the inter-month spread has not fallen sharply following the unilateral crude oil price. We believe that there are several reasons for the current adjustment of oil prices: 1. The uncertainty caused by the failure to reach an unanimous resolution at the OPEC production restriction meeting. 2. The U.S. dollar appreciates. 3. Recently, shale oil producers have begun to hedge against oil prices next year. In general, we believe that the logic of supply growth not keeping up with demand recovery continues when OPEC has not increased production significantly, and the supply and demand gap cannot be filled in a short time.
Strategy: neutrally bullish; 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: The market's premium and discount quotations maintained a relatively high level.
Spot: According to SMM, the spot market quotations opened higher and lowered again yesterday. As the market price continued to run above 69,500 yuan/ton, it continued to curb downstream buying interest. Some holders were eager to dump the goods and adjusted their prices drastically, leading the premiums and discounts to fall rapidly. In the morning market, Standard-Grade Copper began to report at a premium of 150-160 yuan/ton to test the buying interest in the market, but the absolute price was too high, resulting in fewer market inquiries. Subsequently, some holders quickly adjusted the price to a premium of 120-140 yuan/ton, which made some rigid-demand buying orders enter the market, but it was still difficult to see a large number of transactions. After the second period, the market gradually offered a supply with a premium of 110 yuan/ton, and even a small amount of quotations of 100 yuan/ton flowed out in the late trading. The new adjustment of prices has caused some traders to purchase a small amount of goods to increase the reserve inventory. So far, the market transaction had slightly improved. The price of High-Grade Copper continued to fall under the drag of Standard-Grade Copper, from a premium of 160 yuan/ton in the morning market all the way down to a premium of 120 yuan/ton, but the market was still difficult to see a large number of transactions. Guixi Copper even reported a premium of 130 yuan/ton, but the price-performance ratio was limited and the market was not favored. Hydro-Copper still reported a premium of 60-80 yuan/ton under the guidance of a few brands such as BMK. However, buyers and sellers still had large differences in price, and it was difficult to reach a consensus.
In the early hours of this morning, there was no new news in the minutes of the Fed meeting. U.S. bond yields continued to fall, but the US dollar index maintained a strong momentum. In terms of fundamentals, the market is currently at the turn of the off-peak season, and there are still some previously suppressed demand that may emerge after the price drops. In addition, the current market premium and discount quotations have maintained a relatively high level, showing that the holders still have some willingness to keep the price up. Therefore, for copper prices, we maintain the judgment that the current copper prices will continue to fluctuate.
In the medium and long term, macroeconomically, the global central banks will continue to maintain the current ultra-loose monetary and fiscal policies in the short term. Although the U.S. dollar has moved strongly after the interest rate meeting, it is largely an overdraft for future economic growth. In terms of fundamentals, the current TC price continues to rise, coupled with the domestic rumor of tapering, so the supply side has a relatively negative impact on copper prices. 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: The rebound of the energy and chemical sector led to a rapid decline in the open interest of the 09 contract; the PTA processing fee was rapidly compressed.
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: take a wait-and-see attitude; (2) Intertemporal: The open interest of the 09 contract has gradually decreased, and the speculative sentiment in the previous period has weakened. The market will gradually transition from a trading model in which the open interest of the 09 contract is larger than the volume of delivery warehouse order to a trading model when the inflection point of the accumulated inventory is expected to arrive in August. In terms of 9-1 spreads, the investment strategy suggests adopting reverse arbitrage when market prices are high.
Risks: The implementation of the PTA plant maintenance plan, the strength of replenishment of terminal speculation, 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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