Iron ore: The supply and demand of the thread and hot-rolled coil have improved, and the demand for raw materials is still good.
Opinion and logic:
Yesterday, China's domestic iron ore futures and spot prices both fell to a certain extent, and the futures market performed better than the spot. The main iron ore contract fell slightly by 5.5 yuan/ton, and closed at 1,219.5 yuan/ton, a decrease of 0.45%. The spot price showed a range of 5-16 decline. Qingdao Port Pb fines closed at 1,475 yuan/ton, Yangdi Fines reported 1,200 yuan/ton, SSF reported at 1,040 yuan/ton. The spread between medium and high-grade products had narrowed slightly, but it was still at an absolute historical high. Yesterday, the port spot transaction volume was 1.05 million tons, an increase of 9.8% from the previous week, and the overall transaction was still at a normal low level.
Recently, domestic steel companies have been increasing their efforts to reduce production, and the market has different views on iron ore. The reason lies in whether production restrictions will significantly compress iron ore demand. However, the mainstream view is that even if the output of crude steel is reduced, the first step will be achieved by adjusting the addition of scrap steel by steel companies. The blast furnace shutdown is a backup option, so the actual demand for iron ore in the near and mid-term will not deteriorate rapidly, but the room for rising is limited. If the production restriction is strong, then it will involve the reduction of blast furnace production, that is, there will be a substantial surplus of iron ore.
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. However, the distant futures contract will likely face a certain increase in the purchase brought about by a greater reduction in production.
Unilateral: tend to be bearish in the medium 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: Pay attention to short-term supply pressure.
On July 14, the most-active RU contract closed at 13,250 (-65) yuan/ton, the price of mixed rubber reported 11,975 (-25) yuan/ton, and the basis of most-active contract stood at -425 yuan/ton (-35); the open interest of top 20 actively traded long positions was 105,910 (+1,374) lots, the short position was 153,649 (+131) lots, and the net short position was 47,739 (-1,243) lots.
On July 14, the most-active NR contract closed at 10,610 (0) yuan/ton, the STR in Qingdao Free Trade Zone reported 1,660 (0) US dollars/ton, the SMR stood at 1,660 (+15) US dollars/ton, and the SIR figure was 1,605 (0) US dollars/ton. The basis of most-active contract reported -209 (+8) 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 49.4 (-0.67), cup lump 43 (0), latex 44.7 (+0.20), RSS3 51.7 (-0.44).
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: Yesterday, the price of rubber remained weak, and during the intraday trading period, the price was boosted due to the news of the fire in the Huangdao warehouse in Qingdao. It is understood that there are a small amount of natural rubber and synthetic rubber in the inventory, accounting for a small proportion, so the real impact is not significant. In the night trading, due to the news of some rubber indicators issued by Yunnan, prices fell again. At present, the fundamentals of rubber have not changed much, and the demand side is still showing a weak momentum. Domestic tire factories are in the seasonal off-season, and the high temperature has also caused the load of the factories to drop. However, the seasonal production peak season for overseas snow tires will soon be ushered in in the later period, and the operating rate is expected to rebound again. The biggest pressure on tire factories now lies in the high inventory of finished products, so it may be difficult to see obvious demand for raw materials in the short term. Therefore, the decline in Qingdao port inventory is more based on the slowdown in imports in the past two months. Although the price is still at a low level, due to the weak driving force, it is expected that the rubber price will fluctuate mainly at a low level.
Risk points: production may increase sharply, inventory may continue to accumulate, and demand may fall sharply.
Crude oil: The UAE and Saudi Arabia are close to reaching an agreement.
Oil prices fell sharply yesterday. According to market sources, the UAE and Saudi Arabia are close to reaching an agreement, which is expected to raise the UAE's production cut baseline to 3.65 million barrels per day next year. However, the final agreement has not yet been reached, because the agreement still requires all OPEC member states to agree. Judging from the UAE’s reduction in production baseline from the 3.8 million barrels per day proposed at the previous meeting, it can be seen that both Saudi Arabia and the UAE have made some compromises. But we think the market may overreact, because even if the UAE has more production quotas, the increase is only about 500,000 barrels per day. Therefore, in the future new production reduction agreement, whether other countries can further increase production is very critical. If the previous plan is still to increase production by 400,000 barrels per day in the limited production alliance, and only the UAE increases production, then the actual OPEC supply will have a limited impact. We believe that before the final agreement is reached, the market is still full of variables, and the recent shocks in oil prices also reflect the uncertainty of the current OPEC production policy.
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: Copper prices have returned to fundamentals, and the impact of macro factors has gradually faded.
Spot: According to SMM news, buyers and sellers in the spot market showed a stalemate yesterday, mainly because the inter-month spread narrowed to 70-80 yuan/ton, and the overall market activity was limited. In the morning session, Standard-Grade Copper reported a premium of 260-270 yuan/ton. But buyers had limited acceptance of this price, and holders were unwilling to sell at a lower price. In the morning market, the 08 contract with a premium of 150-160 yuan/ton was bought instantly, which further strengthened the willingness of holders to support the price. During the second trading period, the quotations of some holders were depressed at a premium of about 250 yuan/ton, which made market transactions smoother. High-Grade Copper's popularity is low, and its quotation has stabilized at a premium of 280 yuan/ton, with limited transactions. Hydro-Copper had a small amount of supply inflow, but due to the downstream price reduction, the spread between it and the Standard-Grade Copper was slightly widened, with the premium of 170-200 yuan/ton. After the market price dropped rapidly by nearly 500 yuan, some downstream buyers entered the market for purchases. However, due to the limited attractiveness of the supply of Hydro-Copper with a premium of 200 yuan/ton, the buyer as a whole maintained just-needed purchases.
Opinion: Fed Chairman Powell stated in his congressional testimony yesterday that the Fed will give notice before it starts to reduce the scale of bond purchases. He also emphasized that monetary policy should still be highly accommodative, which has caused the dollar index to show a significant decline. However, looking at the copper price, it seems that the impact on this has become less obvious. Yesterday it still maintained a weak and volatile pattern, which is relatively consistent with the current fundamentals of copper varieties. Therefore, at the moment, fundamental factors may gradually play a leading role in copper prices.
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. Policy risks may increase.
PTA: The production and sales of filaments have improved, and TA processing fees are still relatively strong.
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.
(1) Unilateral: cautiously bullish;
(2) Intertemporal: The contradiction of the 9-1 spread: the premium brought by the speculative sentiment of the high holding position of the 09 contract VS the turning point of inventory gradually revealed from late July to August.
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
1. 美联储货币政策导向 2.美元指数走势 3.政策风险加剧