Iron ore: Futures outperformed the spot market, and the basis has narrowed slightly.
Opinion and logic:
Yesterday, China's domestic iron ore futures and spot prices rose simultaneously, and futures outperformed the spot market. The most-active iron ore contract pulled up to 1,225 yuan/ton, an increase of 36.5 yuan/ton, or 3.07%. Spot prices showed a range of 2-20 increases. Qingdao Port Pb fines closed at 1,490 yuan/ton, and Yangdi Fines reported 1,200 yuan/ton. The spread between medium and high grade products is still at an absolute historical high. Yesterday, the port spot transaction was 956,000 tons, down 5.7% from the previous week, and the overall transaction was still at a normal low level.
Recently, China's domestic steel companies have intensified their production cuts, and the market has different attitudes towards iron ore. Optimists believe that the current iron ore spot inventory is still in a healthy state, structural contradictions are still prominent, and the supply is difficult to increase significantly. On the contrary, pessimists believe that if domestic production restrictions are strengthened, then the output of molten iron will drop significantly, which will affect iron ore demand. In addition, the current iron ore price is at a high level in recent years, and the ore supply will be relatively guaranteed. Both the long and short sides have their own basis, but the market seems to be more optimistic. The reason is that even if the output of crude steel is reduced, the first step is to adjust the addition of scrap steel by steel companies. The shutdown of the blast furnace is a backup option, so the actual demand for ore in the medium and short term will not deteriorate rapidly.
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, and high domestic and foreign consumption has been supporting the strong operation of iron ore prices. Looking ahead to the future, under the overall production restriction pattern, it is difficult for iron ore prices to have the strength to rise as the thread and hot-rolled coil end, and the price direction of iron ore depends on the strength 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 production restriction of crude steel is strong, iron ore inventory is expected to continue to accumulate, which will gradually turn the supply and demand pattern into oversupply, and subsequent prices are expected to run weaker. In the short term, due to the large basis difference, the iron ore market price is expected to move closer to the spot price under the pattern that the price of the thread and hot-rolled coil is rising steadily. Therefore, it is recommended to be cautiously bullish in the short-term, but do not increase open interest at high prices, and a small amount of positions could be established when market prices are low.
Unilateral: Cautiously bullish in the short term
Spot-Futures Arbitrage: None
Concerns and risks:
1. The policy of restricting 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 data, etc.
Rubber: Port inventory continued to decline.
On July 13, the most-active RU contract closed at 13,315 (+5) yuan/ton, the price of mixed rubber reported 12,000 (0) yuan/ton, and the basis of most-active contract stood at -390 yuan/ton (+155); the open interest of top 20 actively traded long positions was 104,536 (+999) lots, the short position was 153,518 (-1,285) lots, and the net short position was 48,892 (-2,284) lots.
On July 13, the most-active NR contract closed at 10,610 (-60) yuan/ton, the STR in Qingdao Free Trade Zone reported 1,650 (-5) US dollars/ton, the SMR stood at 1,645 (+5) US dollars/ton, and the SIR figure was 1,605 (0) US dollars/ton. The basis of most-active contract reported -217 (+55) yuan/ton.
As of Jul 9: the total inventory of domestic exchanges was 188,158 (+3,872) lots, and the amount of warehouse receipts of exchanges was 174,550 (-100) lots.
Raw materials: Sheet rubber 50.07 (-0.63), cup lump 43 (+0.25), latex 44.5 (+0.70), RSS3 52.14 (-0.16).
As of Jul 8, the operating rate of domestic all-steel tire factories was 43.6% (-1.68%), and the operating rate of semi-steel tire factories was 44.51% (-0.24%).
Opinion: The latest port inventory data released show that the bonded zone inventory rebounded slightly, but the general trade inventory continued to decline, leading to a continued downward trend in total port inventory. In general, driven by the warmer market sentiment, futures prices fluctuated within a narrow range. At present, due to weak demand for rubber and the expected increase in supply during peak seasons, the supply and demand pattern is weak, but the continuous decline in domestic raw material costs and port inventory also supports rubber prices. The loose fundamentals of the rubber market have not improved significantly, but in terms of the absolute value of overseas raw material prices, rubber valuation is still at a low level. In addition, the recent rains will also bring about the firmness of raw material prices, which may also limit the downside of rubber prices.
Risk points: production may increase sharply, inventory may continue to accumulate, and demand may fall sharply.
Crude oil: The IEA monthly report said that the excess inventory has been eliminated.
Due to the spread of delta virus, the current global epidemic situation has deteriorated, and some Asia-Pacific countries such as South Korea and Indonesia have strengthened epidemic prevention measures. From the traffic congestion index, the economic performance of major economies has declined to varying degrees. However, as far as the current situation is concerned, the impact of the epidemic has been relatively weakened. Although refined oil consumption may be affected to varying degrees in the short term, the recent steady increase in global refinery operating rates and the continuous increase in demand for crude oil have continued to expand the supply and demand gap, and the average supply and demand gap in the third quarter will reach 3 million barrels per day. Therefore, the escalation of epidemic prevention in some regions will not have a major impact on the current fundamentals of crude oil, and the overall situation of shortage of supply continues.
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 U.S. dollar rose, and copper prices fell slightly.
Spot: According to SMM news, yesterday's spot market premiums and discounts once again showed a trend of dropping from high. Market prices continued to run at a high level, coupled with narrow fluctuations in the inter-month basis, resulting in limited market activity. In the morning session, Standard-Grade Copper initially reported a premium of 250-260 yuan/ton to test market activity, but there were very few buyers, resulting in relatively low transactions in the market. Some holders adjusted the price to 220-240 yuan/ton in exchange for spot, but it was still difficult to see a large number of transactions. Only a small number of traders entered the market for purchases until a small amount of goods with a premium of 200-210 yuan/ton appeared in the market around the second period. The price in the late trading market returned to a premium of 220 yuan/ton, which brought both buyers and sellers back to the see-saw pattern. The quotation of High-Grade Copper fell rapidly following the price of Standard-Grade Copper, and after reporting a premium of 270 yuan/ton in the morning session, it quickly fell back to 240 yuan/ton. A small amount of Guixi Copper was quoted at a premium of 240 yuan/ton, but the downstream buying did not improve, and there were few active transactions in the market. For Hydro-Copper, a small amount of SPENCE, CMCC and other brands have flowed in. With the rigid demand for buying downstream, the overall price of Hydro-Copper fell slightly to 150-180 yuan/ton.
Opinion: The bleak results of the US Treasury auction yesterday made the yield of US Treasury rise sharply, and the US dollar index also showed a strong upward trend. However, in this process, the copper price reaction was still relatively "calm", with only a slight fall. This may also show that the current macroeconomic impact on the pricing of copper prices is gradually weakening, and there are not too many changes in the fundamentals. Under such circumstances, copper prices are expected to remain volatile.
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: At the end of July, Fuhua Group expects to carry out rounds of inspections; PTA prices rebounded again.
Balance sheet outlook: The inflection point of PTA inventory accumulation will gradually appear in mid-to-late July, making PTA enter the re-accumulation cycle. 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 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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