Iron ore: The black series sectors were rising across the board, and the iron ore basis remained high in the short term.
Affected by the overall rising of black series commodities last week, iron ore futures rose again and returned to above 1,200 yuan/ton. As of the close of last Friday, the iron ore 2109 contract closed at 1,241 yuan/ton, a week-on-week increase of 78 yuan/ton, or 6.71%. In terms of spot, last Friday, Qingdao Port's PB fines reported a rise of 15 yuan/ton at 1,485 yuan/ton, SSF reported a rise of 3 yuan/ton at 1,043 yuan/ton, and the Platts 62% index reported at US$219.8/ton, an increase of US$2.8/ton. In terms of transactions, the average daily transaction of iron ore at the main port last week was 1.03 million tons, an increase of 200,000 tons from the previous week.
In terms of supply, according to Mysteel's statistics, Australia and Brazil shipped 23.759 million tons of iron ore, a week-on-week decrease of 1.147 million tons. Among them, the total shipment from Australia was 16.235 million tons, a decrease of 1.865 million tons from the previous week. Australia sent 12.77 million tons to China, a decrease of 2.811 million tons from the previous week. The total shipment from Brazil was 7.524 million tons, an increase of 718,000 tons from the previous week. The total global shipment volume was 30.027 million tons, a decrease of 1.759 million tons from the previous week. The total arrival volume of China's 45 ports was 22.76 million tons, a decrease of 2.367 million tons from the previous week. The total arrival volume of the six northern ports was 11.069 million tons, an increase of 453,000 tons from the previous week. Arrivals and shipments have decreased simultaneously, and iron ore supply pressure is relatively small in the short term.
In terms of demand, Mysteel surveyed 247 steel mills with a blast furnace operating rate of 76.69%, a decrease of 1.56% from last week and a year-on-year decrease of 14.06%. The blast furnace ironmaking capacity utilization rate was 88.55%, a week-on-week increase of 2.55%, and a year-on-year decrease of 4.41%. The profit rate of steel mills was 82.68%, a week-on-week increase of 8.66% and a year-on-year decrease of 11.69%. The average daily molten iron output was 2.357 million tons, an increase of 67,800 tons from the previous week and a decrease of 117,400 tons from the same period last year. Mysteel surveyed 163 steel mills with a blast furnace operating rate of 58.56%, a decrease of 0.97% week-on-week. The capacity utilization rate was 70.56%, a week-on-week decrease of 0.74%. The utilization rate excluding the eliminated capacity was 76.81%, a decrease of 8.79% compared with the same period last year. The profit rate of steel mills was 73.01%, an increase of 4.91% from the previous week. The average daily port congestion volume was 2.7709 million tons, down 83,400 tons. The volatility of molten iron output last week was still affected by the previous celebrations and is still in the process of recovery. However, at the same time, the operating rate of the blast furnace is in a downward trend, so there is limited room for the increase of molten iron. Therefore, this has a limited effect on the increase in iron ore demand.
In terms of inventory, according to Mysteel statistics, the imported iron ore inventory of 45 ports across China was 125.5138 million tons, an increase of 937,800 tons from the previous week; the average daily port congestion volume was 2.7709 million tons, a decrease of 83,400 tons. Australian ore reported 65.3804 million tons, an increase of 445,400 tons; Brazil’s figure was 33.5141 million tons, an increase of 674,100 tons; trade ore reported 68.388 million tons, an increase of 426,000 tons; pellets reported 3.8427 million tons, a decrease of 19,600 tons; iron ore concentrates reported 9.2051 million tons, an increase of 178,100 tons; lump ore increased by 293,900 tons at 18.7459 million tons; coarse iron powder increased by 485,400 tons at 93.7201 tons, an increase of 0.4854 million tons; the number of ships in port was 155, an increase of 17.
On the whole, the current contradiction between the supply and demand of iron ore is still not prominent, and the structural contradictions still exist, so the overall inventory remains low and is a state of destocking. The fundamental performance is relatively healthy, but due to the large basis, the probability that prices will maintain a strong operation in the short-term is greater. 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. Therefore, the arbitrage combination of initiating a long position of the thread and hot-rolled coil and a short position of the distant futures contract is recommended. At the same time, since profit margins have already appeared in the market, it is recommended to over-allocate the position of the thread and hot-rolled coil end.
Unilateral: neutrally in the short term; tend to be bearish in the medium term (depends on the intensity of production restriction)
Cross-species: initiate a long position of the nearby futures contract of the thread and hot-rolled coil and a short position of the distant futures contract of iron ore
Spot-Futures Arbitrage: None
Concerns and risk points:
1. The intensity of production restriction and policy orientation of the thread and hot-rolled coil end may fell short of expectations;
2. The off-season demand performance of the thread and hot-rolled coil end may fell short of expectations;
3. The epidemic may worsen.
Rubber: The negative factors in demand are released, and the price of rubber continues to rebound.
The rubber futures price continued to rebound last week, and its macro support mainly came from the phased easing of domestic monetary funds, while its own fundamental support mainly came from the re-rising of downstream tire factory operating rates.
The total inventory of domestic exchanges as of July 16 was 190,615 tons (+2457), and the amount of futures warehouse receipts was 178,150 tons (+3600). Last week's rebound in rubber prices and the release of domestic raw materials have brought a significant increase in warehouse receipts. As of July 11, inventory in Qingdao Free Trade Zone continued to fall slightly, mainly due to the decrease in arrivals.
According to Zhuo Chuang's understanding, the lack of downstream buying support in the domestic spot market has led to a weak transaction sentiment in the market and delayed shipments by traders. In the last week, the U.S. dollar rubber market had active quotations and shipments, but buying was still scarce, and most midstream traders maintained just-needed purchases. The short-term weak demand situation is difficult to improve. Due to heavy rainfall in Thailand's production areas, the supply of latex was blocked, supporting the rebound in raw material prices, and ultimately driving the price increase in the U.S. cargo market. However, due to the current weak domestic terminal purchasing sentiment and the predominantly spot rig-demand purchases, the trading atmosphere for US dollar cargoes is not yet active. As of last weekend, the premium for synthetic rubber was -775 yuan/ton (-750). The continuous increase in butadiene prices last week brought about a surge in synthetic rubber, which caused the spread between the two to widen rapidly, or brought about an anti-substitution for natural rubber demand.
In terms of downstream tire operating rate, as of July 15, the operating rate of all-steel tire companies was 58.95% (+15.35%), and the operating rate of semi-steel tire companies was 55.84 (+11.33%). The operating rate rebounded again last week, but China is in the off-season, and the recovery of the operating rate in July is limited.
Opinion: The recent rebound in rubber prices is mainly due to the relaxation brought about by the release of negative factors, as well as repairs due to the recovery of the operating rate of domestic tire factories, after the rapid drop of the overseas raw material end in the early stage and the significant decrease of the operating rate of domestic downstream tire factories. At the same time, the phased turn of the domestic macro-monetary policy last week also gave support to rubber prices. At present, the upper pressure of RU's main contract is mainly in the arbitrage window of RSS3 imports. According to the current price of RSS3, it is estimated to be at the line of 13,900 yuan/ton. July to August is still the low season for domestic demand, so there is limited room for short-term tire operating rates to continue to rise. At the same time, the biggest pressure on tire factories now lies in the inventory of finished products. Therefore, it is necessary to see the finished product inventory effectively decline in the later stage, or there will be more obvious demand for raw material procurement. From a medium-term fundamental perspective, domestic production will gradually pick up, overseas major production areas will also enter the peak season, the demand will show off-season characteristics, domestic demand is weakening week-on-week, and exports are still weak due to container tensions. Mid-term supply and demand expectations are still weak, and the rebound in rubber prices is expected to be limited.
Strategy: cautiously bullish, and it is recommended to invest in the short term
Risk points: Domestic supply may increase substantially, demand may continue to weaken due to the epidemic and other impacts, and funding might be tight.
Crude oil: OPEC re-reached an agreement, eliminating the risk of market uncertainty.
OPEC finally reached an agreement at the weekend of last week. According to the latest arrangement, OPEC's total output will increase by 400,000 barrels/day from August until the current reduction of 5.8 million barrels/day is fully compensated, that is, it will be fully restored by September next year. However, OPEC still gives greater flexibility to the production reduction agreement, and will hold a meeting at the end of this year to assess market conditions and decide whether to adjust the production restriction policy. In addition, the monthly ministerial meeting and the JMMC meeting mechanism will continue. The production reduction baseline problem that caused conflicts among member states has also been resolved, that is, starting from May next year, the UAE will be able to increase the baseline from 3.168 million barrels per day to 3.5 million barrels per day (lower than the 3.8 million barrels per day previously required). The Iraqi and Kuwaiti baselines each increased by 150,000 barrels/day, and Saudi Arabia and Russia each increased by 500,000 barrels/day, for a total increase of approximately 1.6 million barrels/day.
From the perspective of the impact of the meeting results, we believe that the overall impact is neutral. First of all, compared with the original plan, there is no change in the increased supply this year, and the production will still increase by 2 million barrels per day in the remaining five months. However, due to the adjustment of production benchmarks in five countries, it means that the rate of increase in production next year will increase. OPEC's intention to gradually withdraw from the production restriction agreement has gradually become clear, but the overall strategy of cautiously increasing production and controlling the pace of production recovery has not changed. Supply growth this year is still lower than the demand recovery, the supply-demand gap will continue, and the strength of the nearby futures contract will continue.
Secondly, since the increase in production this year has not changed, there is not much deviation from the market's previous expectations, but a large uncertainty in the current market has been eliminated. Finally, after the variable of OPEC's production increase is determined, the core focus of the market's attention is the pace of demand recovery and the time for Iranian oil to return to the market. The recent Delta strain has once again brought uncertainty to the demand recovery. Although the number of infections in some countries has increased, the epidemic situation is still relatively controllable. On the Iranian side, the current negotiations have temporarily stalled due to various reasons, and will not resume until the Iranian President agrees at the earliest. The market expects that the return of Iranian oil to the market will be postponed to the end of the year.
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: TC prices continue to rise, and the supply side may continue to exert pressure on prices.
According to SMM news, the average price of SMM 1# Copper Cathode in the week of July 16 was between 68,835 yuan/ton and 69,695 yuan/ton, and the average premium and discount price of Standard-Grade Copper was between 225 yuan/ton and 330 yuan/ton. Last week, copper prices basically remained in a volatile pattern. Although the Federal Reserve frequently made dovish remarks last week, it seemed to have less impact on copper prices. The current copper price is gradually returning to the fundamental pricing logic.
Short-term: Last week, TC prices continued to rise, and they have reached the level of US$50.82/ton. Moreover, the price of its by-product sulfuric acid has also maintained a strong upward trend, and has reached a level of 666.40 yuan/ton. The previous relatively meagre profits of refineries should be eased to a great extent. Therefore, as far as the supply side is concerned, the pressure on prices may increase. However, on the demand side, this week we can still see the situation where the holders raise the premium and discount in order to support the price. Therefore, under the current circumstances, the upper limit of copper prices is under pressure while the lower limit is supported by downstream. Therefore, from the perspective of fundamentals, it is expected that copper prices will still be dominated by shocks for the time being. This week we need to pay attention to the euro zone central bank interest rate decision.
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
Focus point: Domestic delivery situation.
PTA: The rebound of crude oil has driven the cost of PTA to rise; TA processing fees are on the high side in the short term.
Balance sheet outlook: PTA re-entered the inventory accumulation cycle for the first time in August; the inventory accumulation rate of PX from 7 to 8 months was limited.
(1) Unilateral: TA processing fees are on the high side in the short term, 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.
单边 ：短期中性 中期偏空（视压产力度而定）
1. 单边：中性 2. 跨市：暂缓 3. 跨期：暂缓；4. 期权：暂缓