Iron ore: The production and sales of the thread and hot-rolled coil have rebounded, and the raw materials are running strongly.
Opinion and logic:
Yesterday, China's domestic iron ore futures and spot prices both showed an upward trend. The main iron ore contract plunged during the intraday session, and then fluctuated higher. As of the close, it rose 19.5 yuan/ton, and closed at 1,234 yuan/ton, an increase of 1.61%. The spot price generally rose. Qingdao Port Pb fines closed at 1,478 yuan/ton, up 3 yuan/ton; SSF reported 1,044 yuan/ton, up 4 yuan/ton. Yesterday, the port spot transaction was 1.14 million tons, an increase of 90,000 tons 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: The price of raw materials is relatively strong at home and relatively weak at abroad.
On July 15, the most-active RU contract closed at 13,370 (+120) yuan/ton, the price of mixed rubber reported 11,900 (-150) yuan/ton, and the basis of most-active contract stood at -445 yuan/ton (-20); 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 15, the most-active NR contract closed at 10,765 (+155) yuan/ton, the STR in Qingdao Free Trade Zone reported 1,670 (+10) US dollars/ton, the SMR stood at 1,655 (-5) US dollars/ton, and the SIR figure was 1,615 (-10) US dollars/ton. The basis of most-active contract reported -325 (-117) 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 49.77 (+0.37), cup lump 43 (0), latex 44.7 (0), RSS3 52.11 (+0.41).
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 price of rubber fluctuated strongly yesterday. After the negative impact of the sharp drop in overseas raw material prices and the sharp decline in the operating rate of domestic tire factories ended, the contradiction between supply and demand has eased. 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. In the future, investors can mainly focus on the rhythm of supply. 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: OPEC's crude oil production increased slightly in June.
Judging from the recent impact of the Delta strain, Europe is the most affected region. The traffic congestion index in Europe dropped from the previous 90% to the 70% quintile; the traffic congestion index in North America also dropped slightly; although the traffic index in the Asia-Pacific region did not drop significantly, it still hovered around 50%. The current Delta strain has a certain impact on the prospects for future demand recovery. However, considering that countries are unlikely to adopt more stringent lockdown measures, we do not believe that this round of the epidemic will have a major impact on crude oil demand. In addition, the destocking of global crude oil inventories is smooth, and the recovery of refined oil demand may be affected in the short term. But if the demand for crude oil does decline in the future, it will need to rely on the decline in refinery operating rates to make adjustments. However, this situation has not yet occurred, and the global refinery operating rate is still recovering steadily.
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: Crude oil fell, but copper prices remained stable.
In terms of spot: According to SMM news, yesterday, the quotation of Shanghai Copper Cathode spot price against the current month's contract was at a premium of 310 to 390 yuan/ton, with an average price premium of 350 yuan/ton, an increase of 80 yuan/ton from the previous day. The transaction price of Standard-Grade Copper was 68670 - 69000 yuan/ton, and the transaction price of High-Grade Copper was 68700 - 69000 yuan/ton. Yesterday was the last trading day of the 2107 contract, and the mainstream market made quotations on the 08 contract. The inter-month spread of the 07 and 08 contracts was still showing the Contango structure, the intraday spread fluctuates widely, ranging mostly between Contango 40-70 yuan/ton, and the largest expansion was about 100 yuan/ton. Yesterday, the Shanghai Copper 2108 contract opened low and moved high. Its price has gradually rebounded since the opening price of 68,080 yuan/ton. By the spot trading session, its price has exceeded the daily average line and fluctuated around 68,600 yuan/ton above the daily average line. Yesterday, the mainstream spot market quoted prices for the 08 contract, and the quotes for the 07 contract basically followed the trend of the inter-month spread. Although the inter-month spread had a large volatility and a high frequency of changes, the quotation for the 08 contract was still stable. The quotation of Standard-Grade Copper stood at a premium of 270-280 yuan/ton, High-Grade Copper was priced at a premium of 300-320 yuan/ton, and a small amount of Hydro-Copper represented by the ESOX brand was quoted at a premium of 200-220 yuan/ton. Some Bulgarian brands was quoted at a premium of 230-250 yuan/ton.
Opinion: From recent data, it can be found that the trend of copper prices is gradually returning to fundamental pricing. At present, the upper limit of the copper price is under pressure due to the gradual increase in supply, and the lower limit is supported by the suppressed purchase demand in the first two quarters due to high prices. Therefore, from a fundamental point of view, copper prices may still maintain a volatile pattern. Yesterday, crude oil prices continued to show a significant correction, which would logically have a certain negative effect on copper prices due to the impact of inflation expectations, but yesterday copper prices still showed a pattern of strong volatility. From this point of view, the current macro-pricing role may be weaker, and we still maintain a volatile judgment on copper prices in the near future.
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 correction of crude oil prices led to a fall in PTA costs.
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: The processing fee is too high, and it is recommended to maintain a wait-and-see attitude for the time being.
(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
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