Iron Ore: After a rapid decline, iron ore rebounded slightly, maintaining a low-level shock pattern.
Since September, the contract price of iron ore 01 fell rapidly from 800 yuan/ton to the lowest of 606 yuan/ton, and finally rebounded slightly at the end of the month to close at 721.5 yuan/ton. With the steady implementation of the national crude steel production restriction policy in September, the output of molten iron continued to decline. At the same time, the downstream steel consumption is in the off-season, coupled with the national typhoon and heavy rain, aggravated the weak performance of the consumption of building materials. Affected by the National Day holiday at the end of the month, steel mills have a rigid demand for restocking, which caused iron ore prices to rebound to a certain extent after a sharp drop. In terms of spot, as of September 30, the Mysteel iron ore forward spot price index was 116.5 US dollars/DMT, down 35.1 US dollars/DMT from the beginning of the month, or 23.2%. The 62% Australian fine ore port spot price index was 860.0 yuan/WT, down 218.0 yuan/ WT from the beginning of the month, or 20.2%.
On the supply side, the shipment of imported iron ore in September rebounded from the previous period. The global average monthly iron ore shipment totaled 32.22 million tons, an average monthly increase of 970,000 tons from the previous month. Among them, due to the completion of overhauls in Australia, the supply has increased significantly from the previous month. The average monthly shipment in September was 18.75 million tons, an increase of 1.54 million tons from the previous month, reaching the second highest since the beginning of this year. In addition, shipments of non-mainstream countries other than Australia and Brazil have fallen due to the epidemic and China's demand reduction. The overall iron ore supply is expected to see a significant improvement from the previous month. However, the domestic iron ore concentrates are affected by the safety production, and the domestic mines are expected to resume production step by step, but it is difficult to cause too much disturbance to the overall domestic supply.
On the demand side, China's production restriction policy steadily advanced in September, resulting in a continuous decline in molten iron output. As of September 30, according to a sample of 247 steel mills calculated by Mysteel, the total output of molten iron in September fell 4.87 million tons from the previous month to 66.21 million tons. Considering that the production limit timeline will be completed in advance to the end of November, this will inevitably lead to a further decline in domestic iron ore consumption. More importantly, in the future, steel smelting will still be subject to the dual restrictions of staggered production during the heating season and the Winter Olympics, making it difficult for domestic iron ore consumption to increase.
On the inventory side, the total amount of imported iron ore arrivals at ports in September fell back from the previous month. As of September 30, according to Mysteel's 45 ports data, the total port inventory was 13.32166 million tons, an increase of 4.65 million tons month-on-month. From June to September, iron ore inventories have substantially accumulated about 8 million tons. In September, the stocks of 247 steel imported iron ore nationwide continued to decline. Although there was a wave of replenishment before the National Day, the overall position remained low.
On the whole, the national crude steel production limit policy is steadily advancing, and companies are required to complete the reduction task by November, resulting in a further decline in domestic iron ore consumption. Coupled with the continued high inventory of imported iron ore, the pattern of oversupply of iron ore has continued. However, the recent sharp increase in ocean freight has also increased the landed cost of iron ore. However, there is little room for iron ore prices to rise under the general trend. It is expected that there will be a slight fluctuation in the fourth quarter, and it is recommended to take a wait-and-see attitude.
Cross-species: initiate a long position of thread and hot-rolled coil and a short position of iron ore
Spot-Futures Arbitrage: None
Concerns and risks:
1. The implementation strength and extent of the crude steel production restriction policy;
2. The risk of rising ocean freight.
Rubber: There is no pressure on supply for the time being, and prices are expected to fluctuate strongly.
Due to the peak season, the price of rubber raw materials in October will maintain a volatile and weak trend. However, from the rain pattern in Thailand, it is expected that October is still in the rainy season, and the end of October may usher in a period of less rain. At that time, the raw materials may be released in large quantities. After all, the current raw material prices are still in the middle position and are not significantly underestimated. Therefore, it may be difficult to see a sharp decline in raw material prices in October.
We believe that October will usher in the continued destocking of domestic dark rubber stocks. But the biggest risk of demand lies in the impact of domestic dual control on tire production. If the tire operating rate continues to be suppressed, it is not conducive to the stabilization of raw material prices. The destocking of dark rubber will also end, but we still need to see the arrivals at ports to re-accumulate the inventory. As for the light-colored rubber, due to the continuous increase in domestic production, the inventory will continue to rise.
Due to the arrival of the peak season for rubber delivery at home and abroad, domestic supply has continued to increase, but overseas major production areas such as Thailand have not yet completely ended the rain in October, and it is expected that production will not rebound sharply. The logistics disruption caused by the increase in domestic sea freight and the epidemic in Southeast Asia may still not be effectively improved in October. Therefore, the pace of domestic arrivals at ports are still relatively slow, and the transmission of overseas supply in the peak season will be delayed. Therefore, the domestic supply pressure in October is temporarily no. Demand is weak and stable, and the worst moment has passed. Therefore, we believe that in the absence of significant supply pressure, the October rubber price is expected to fluctuate strongly. It is recommended to take a bullish thinking.
Strategy: cautiously bullish
Risks: production may increase substantially, inventory may continue to accumulate, and demand may decrease substantially, etc.
Crude oil: The recovery of traditional transportation consumption is slowing down, and attention is paid to the alternative consumption of natural gas.
We believe that the uncertainty in the crude oil market in the fourth quarter has increased significantly, and market volatility will become more intense, mainly reflected in: 1. Uncertainty in natural gas spillover effects. There is no clear answer to how much the demand for natural gas substitution can boost the recovery of crude oil consumption. The market estimate has a wide range, ranging from 500,000 barrels/day to 2 million barrels/day, depending on the relationship between oil and gas prices and the physical bottleneck of the facility. Taking into account the 1 to 1.5 million barrels/day gap in the crude oil market itself in the fourth quarter, there is no doubt that the balance sheet gap in the fourth quarter will continue to rise if OPEC does not increase production. This means that the rate of destocking of crude oil inventories will accelerate in the fourth quarter. Considering that the current global oil inventory is already at a 5-year low level, the impact of natural gas substitution demand on oil prices will be even more significant. 2. How China and the United States use strategic reserve stocks, including the timing and quantity of release. The use of strategic reserve stocks will significantly ease the current supply and demand gap. This is also a process of policy and market game. For example, although China released the first batch of strategic reserves of crude oil, the price of oil rose instead of falling, mainly because the form and quantity of the issuance fell short of expectations. The market does not seem to be worried about China's selling of strategic reserves, but the US release of reserves is not within market expectations, which is also an important reason for the sharp fluctuations in oil prices during the National Day. If the United States starts to dump reserves significantly, it will have a significant impact on oil prices. 3. The uncertainty of temperature this winter. Since the beginning of this year, the global abnormal weather has increased significantly, extreme cold and high temperature have alternated, and heavy rains and droughts have also occurred frequently around the world, which makes it more difficult to predict the temperature this winter. If the extremely cold weather similar to last year occurs again this winter, it is expected to boost the energy varieties including heating oil again, which will become another fuse to detonate oil prices.
We believe that oil prices remained high in the fourth quarter, and prices are prone to rise but difficult to fall. There are still many stories to tell in areas such as natural gas substitution demand and extreme weather. At the same time, under the background of limited supply of shale oil in OPEC and the United States during the year, the supply of crude oil is inelastic, and the driving force of supply and demand is still strong. In the oil sector, thanks to the boost in consumption substitution, heating and other fields, we expect diesel, LPG and fuel oil to remain relatively strong varieties in the sector.
Strategy: Cautiously bullish, go long of U.S. distillate oil crack spreads
Risk: The United States may substantially release its strategic crude oil reserves.
PTA: The dual control dragged down the polyester operating rate, while the upstream PX fell on the left.
Balance sheet outlook: PTA is still expected to accumulate inventory from October to November under the background of implementation of overhaul; the Asian PX balance sheet is expected to continue to accumulate inventory slightly from October to November.
(1) Unilateral: Processing fees have rebounded, and it is recommended to take a wait-and-see attitude;
(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.