Iron Ore: Production restrictions continued to be exerted, and iron ore prices continued to fall.
In terms of supply, global iron ore shipments totaled 31.786 million tons, a week-on-week decrease of 588,000 tons; Australia and Brazil’s 19 ports of iron ore shipped totaled 25.795 million tons, an increase of 140,000 tons week-on-week; Australia shipped 18.484 million tons, a decrease of 512,000 tons from the previous week; of which 14.163 million tons were shipped from Australia to China, a decrease of 1.16 million tons from the previous week; Brazil shipped 7.311 million tons, an increase of 372,000 tons from the previous week. The total arrivals at 45 ports in China was 23.935 million tons, a decrease of 1.06 million tons from the previous week; the total arrivals at the six northern ports was 13.104 million tons, an increase of 2.837 million tons from the previous week. Under the good weather performance, the southeast coast of China was affected by Typhoon Candu last week, which made the supply side present a loose pattern. Next week, local production reduction policies will continue to be promulgated and implemented, and short-term iron ore shipments and arrivals will increase week-on-week.
In terms of demand, Mysteel surveyed 247 steel mills with a blast furnace operating rate of 71.88%, a decrease of 1.69% week-on-week and a year-on-year decrease of 18.75%; blast furnace ironmaking capacity utilization rate was 83.74%, a week-on-week decrease of 1.03%, and a year-on-year decrease of 10.51%; the profit rate of steel mills was 88.31%, a week-on-week increase of 0.43%, and a year-on-year decrease of 5.19%; the average daily molten iron output was 2.229 million tons, a week-on-week decrease of 27,300 tons and a year-on-year decrease of 279,700 tons. Mysteel surveyed 163 steel mills with a blast furnace operating rate of 55.66%, a week-on-week decrease of 0.83%, a capacity utilization rate of 68.13%, a week-on-week increase of 0.05%, and a utilization rate of 74.17% excluding eliminated capacity, a decrease of 10.79% from the same period last year, and a steel mill profit rate of 78.53 %, an increase of 0.61% week-on-week. Affected by the continuous advancement of the production restriction of crude steel, the demand side of iron ore continued to decrease, and the iron ore remained weak.
In terms of inventory, Mysteel counted 12,975.74 imported iron ore inventories in 45 ports across China, a decrease of 59.46 week-on-week; the average daily port congestion volume of 274.23 dropped by 9.03. Australian mines 6414.89 decreased by 66.69, Brazilian mines 4020.83 increased by 166.67, trade ore 7581.90 increased by 105.00, pellets 408.51 decreased by 9.79, iron ore concentrates 1082.77 increased by 43.32, lump ore 206.84 increased by 32.05, and coarse iron powder 9415.82 decreased by 38.4. The number of ships in the port was 177, a drop of 8. Last week's port inventory exceeded 5 million tons from the beginning of the year, which was at the historical median level in the past five years, mainly low-grade non-mainstream mines. As the global shipment of iron ore this year was significantly lower than expected at the beginning of the year, the current performance of iron ore inventory accumulation is also lower than expected as the demand for limited production of crude steel decreases.
On the whole, the production restriction plans of various provinces were quickly issued and implemented to specific units in September. In the second half of the year, the national policy of restricting the production of crude steel basically continued, and iron ore prices are unlikely to show strong performance. From the background of global environmental awareness, vigorously promote low-carbon green environmental protection. The carbon element industry chain bears the brunt of the suppression, and the restrictions on the two high industries have increased. From the current situation of high-intensity implementation of dual control of energy consumption in China, high-energy-consuming and high-carbon industries have initiated a full range of industrial transformation and upgrading, and at the same time limited production and power restrictions to reduce energy use efficiency. In this context, the expansion of China's blast furnace ironmaking end is difficult to sustain.
Unilateral: tend to be bearish in the medium term
Cross-species: initiate a long position of thread and hot-rolled coil and a short position of iron ore
Spot-Futures Arbitrage: None
Options: buying a put option
Concerns and risks:
1. The intensity of production restriction at the thread and hot-rolled coil end;
2. The impact of typhoon weather;
3. Replenishment of inventory during Mid-Autumn Festival and National Day;
4. The epidemic may aggravate and so on.
Rubber: Demand recovery is limited and the drive is weak.
Rubber futures prices rebounded slightly last week. Driven by the recovery of the operating rate of domestic tire factories, prices are under support. At the same time, as the Mid-Autumn Festival approaches, downstream tire factories have carried out certain raw material purchases at low prices, which continued the downward trend of port inventory and continued the recovery trend of rubber prices. During the holiday period, the prices of external markets fell sharply, mainly due to the strength of the US dollar and the pressure on commodities.
The total inventory of domestic exchanges as of September 17 was 236,651 tons (+4471), and the amount of futures warehouse receipts was 19,850 tons (+1380). The domestic rubber delivery season has caused the recent stock exchange growth rate to continue to increase. As of September 12, due to the increase in downstream purchases, the inventory in Qingdao Free Trade Zone continued its downward trend, and the absolute volume was also at a low level in recent years compared to the same period last year.
In terms of downstream tire operating rate, as of September 16, the operating rate of all-steel tire companies was 58.5% (+17.3%), and that of semi-steel tire companies was 52.73% (+13.3%). With the gradual end of domestic environmental inspections, the tire factory operating rate rebounded again. Seasonally, the operating rate in September improved seasonally, but the overall improvement was limited due to the economic downturn in overseas.
Viewpoint: Under the strong US dollar during the holiday, the external price of the market is under pressure and downward, and it is expected that domestic prices will also be dragged down by this. From a fundamental point of view, the short-term driving force is expected to gradually weaken following the recovery of market prices last week. In the future, we will focus on changes on the supply side. On the demand side, after the domestic environmental inspection, the tire factory operating rate was restored last week. Due to the high inventory of finished products in tire factories, it is expected that speculative demand will not be released after normal stocking of raw materials. Domestic demand is weak, and the continuation of overseas demand orders may make domestic tire exports acceptable. The overall demand side may not change too much, and weak and stable. Therefore, changes on the supply side in the future may have a more important impact on prices. At present, the domestic port inventory is delayed due to the impact of logistics, and it will still support domestic prices in the short term. It is expected that the rubber price range in September will fluctuate mainly.
Risks: production may increase substantially, inventory may continue to accumulate, and demand may decrease substantially, etc.
Crude oil: Hurricane Ida caused the three major agencies to revise their supply growth forecasts.
Last week, the three major institutions issued a September report. Although due to the epidemic, the three major institutions have slightly lowered their demand, but the impact of Hurricane Ida has led to a greater downward revision of the supply, thus magnifying the balance sheet gap. However, from the perspective of trends, the balance sheet gap in the fourth quarter will be significantly narrowed. In addition, it is worth noting that the current OECD oil inventory has been at a 5-year low level, and the trend of inventory depletion is still smooth.
Demand: EIA predicts that the demand growth in 2021 will be 4.96 million barrels/day, which is a decrease of 300,000 barrels/day from the previous month. This is mainly due to the Delta epidemic causing demand to be revised down by nearly 500,000 barrels/day in the third quarter. OPEC predicts that demand growth in 2021 is estimated at 5.95 million barrels per day, which is little changed from last month's forecast. IEA predicts that demand growth in 2021 is estimated to be 5.23 million barrels per day, which is revised down by 110,000 barrels per day from last month's forecast, mainly from Japan and India.
Non-OPEC supply: EIA expects that 2021 non-OPEC supply will increase by 900,000 barrels/day compared with the previous month’s forecast, which will be revised down by 200,000 barrels/day, mainly in Russia, the United States and Asia. EIA predicts that the total liquid supply in the United States will increase by 60,000 barrels per day in 2021 year-on-year, and it is expected to increase by 1.37 million barrels per day in 2022. OPEC expects that 2021 non-OPEC supply will increase by 920,000 barrels/day, which is 170,000 barrels/day lower than the previous month’s forecast. Major global producing areas have been revised down to varying degrees. OPEC expects that US liquid production will increase by 80,000 barrels/day year-on-year. , Which was revised down by 40,000 barrels per day from the previous month. The IEA expects that non-OPEC supply in 2021 will increase by 680,000 barrels per day year-on-year, which is a downward revision of 180,000 barrels per day from last month's forecast, mainly due to lower production in the United States and Brazil.
OPEC production: EIA caliber OPEC's production in August increased by 60,000 barrels/day to 26.78 million barrels/day. The increase in Saudi production was offset by the decline in Nigeria’s output. OPEC's August OPEC production increased by 150,000 barrels/day to 26.76 million barrels/day from the previous month, mainly from Saudi Arabia, Iraq and the United Arab Emirates. According to IEA, the output of OPEC in August increased by 210,000 barrels/day to 26.89 million barrels/day. OPEC’s overall compliance rate was 118%, and the increase in production came from Saudi Arabia and Iraq.
Call on OPEC: EIA estimates COO for 2021 at 27.66 million barrels/day, which is revised down by 60,000 barrels/day from the previous month. According to the EIA balance sheet, the difference between supply and demand in the first to fourth quarters is -1.9 million barrels/day,- 1.7 million barrels/day, -1.3 million barrels/day, and 200,000 barrels/day, the gap in the third quarter continued to be enlarged compared with last month’s forecast. OPEC estimates that the COO for 2021 is 27.66 million barrels/day, an increase of 260,000 barrels/day from last month. From the first to the fourth quarter, the COO was 2530, 2730, 2910, and 28.9 million barrels/day. The COO in the third quarter was revised up significantly. The IEA estimates COO for 2021 at 27.2 million barrels/day, an upward revision of 170,000 barrels/day from the previous month, and the COO of 2630, 2640, 2780, and 28.2 million barrels/day for the first to fourth quarters, with a slight upward revision in the second and third quarters.
Strategy: Unilaterally neutral, go long of U.S. distillate oil crack spreads
Risk: The impact of the hurricane was less than expected.
Copper: The external market price fell during the holiday period, pay attention to the FOMC meeting this week.
Spot situation: According to SMM news, the average price of SMM1# electrolytic copper in the week of September 17 was operating at RMB 69,785/ton-RMB 71,475/ton, which fluctuated in the middle of the week. The average premium and discount quotation of flat water copper runs from a discount of 35 yuan/ton to a premium of 125 yuan/ton. Last week, the price of copper fluctuated downwards after it surged on Monday. The Shanghai Copper 11 contract fell from a maximum of RMB 71,820 to a minimum of RMB 68,920/ton. It closed at RMB 69,130/ton on Friday night, a weekly drop of RMB 1,050/ton.
From a macro point of view, the US inflation data was lower than expected, the number of initial jobless claims continued to remain low, and the monthly retail sales rate in August exceeded expectations, alleviating market concerns about economic recovery. The good performance in terms of data has given the market an expectation for the implementation of Taper as soon as possible. But at the same time, the U.S. debt ceiling is currently facing a critical moment. On October 1, if Congress does not take action, much of the federal government’s operating funds will be exhausted; and later in October, the United States may exceed the debt ceiling, leading to a historic appearance in the United States. Debt default. During the Mid-Autumn Festival holiday, the markets of China, Japan, and South Korea were closed due to the holiday. Market transactions were cold, US stocks and futures fell sharply, and the US dollar strengthened. This partly reflects the uncertainty of the market for economic growth prospects. On the domestic front, the National Development and Reform Commission has frequently spoken out that it will closely monitor changes in market prices and continue to release material reserves to the market. Economic data was announced in August. Except for the relatively strong export data announced in the previous period, the rest of the data showed a decline in the year-on-year growth rate to varying degrees. In terms of infrastructure, which the market is concerned about recently, infrastructure investment has fallen again, with -7% year-on-year in the same month, a slight rebound from July but still at a low level. Through tracking the special debt data, we can see that the current fiscal landing has accelerated, and our judgment is passed on to infrastructure investment. It will take time to go up. Therefore, the view on the financial rearrangement and infrastructure underpinning still needs to be verified at present, and should not be overly optimistic.
On the whole, the macro aspect is negative to the price, but the tightness of scrap copper and low inventory still support the price to a certain extent. This week is about to usher in the Fed's FOMC interest rate decision, which will have a key impact on the future trend of copper prices.
On the macro level, the global central bank will continue to maintain the current ultra-loose monetary and fiscal policies in the short term. However, the recent strengthening of the Fed’s taper expectations has led to a substantial strengthening of the U.S. dollar, which is not very beneficial to the overall non-ferrous metal sector, including copper. In terms of fundamentals, the current TC price continues to rise, coupled with the domestic implementation of reserve release, so the supply side has a relatively negative impact on copper prices. On the demand side, there is currently no situation in which copper has accumulated inventory immediately after entering the off-season. In the future, investors need to continue to pay attention to the emergence of inventory turning points.
1. Unilateral: neutral
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: Hengli's PTA maintenance plan was implemented, and the balance sheet was improved in October.
Balance sheet outlook: In the context of continuous filament maintenance, the PTA September balance sheet ushered in the first inflection point of the inventory accumulation, but the accumulation rate is controllable, and the accumulating pressure in October will not be great. The Asian PX balance sheet was slightly destocked in September, and there was a slight inventory accumulation expectation in October-November.
(1) Unilateral: cautiously bullish;
(2) Intertemporal: For the 1-5 spread, it is recommended to take a wait-and-see attitude for the time being.
Risks: PTA factory's control over the maintenance rhythm; the load situation of Zhejiang Petrochemical PX; the maintenance time of polyester reduced load.
Call on OPEC：EIA对2021年COO预估为2766万桶/日，较上月下修6万桶/日，根据EIA平衡表，一到四季度供需差值为-190万桶/日、-170万桶/日、-130万桶/日、-20万桶/日，三季度的缺口较上月预测继续放大。OPEC对2021年COO预估为2766万桶/日，较上月上修26万桶/日，一到四季度COO为2530、2730、2910、2890万桶/日，三季度COO显著上修。IEA对2021年COO预估为2720万桶/日，较上月上修17万桶/日，一到四季度COO为2630、2640、2780、2820万桶/日，二、三季度小幅上修。
策略：1. 单边：中性 2. 跨市：暂缓 3. 跨期：暂缓；4. 期权：暂缓