Iron Ore: Short-term demand may pick up, but high inventory pressure is difficult to change.
Viewpoint and logic:
Today's main iron ore contract is still running weak, closing at 561 yuan/ton, and the lowest intraday price hit 550 yuan/ton, setting a new low for this contract. In terms of spot, the port spot of imported iron ore continued to fall in the afternoon, with a cumulative drop of 0-15 yuan/WT throughout the day. Qingdao Port PB powder reported 655-665 yuan/ WT, and SSF 395-400 yuan/ WT.
On the supply side, the total inventory of 45 ports this Monday was 14.9263 million tons, and last Monday figure was 146,496,300 tons. This week's port inventory increased by 2.767 million tons from the previous month. In terms of sub-regions, port inventories in all districts have increased. On the demand side, the secondary emergency response in Tangshan area was lifted, the weather improved, production restrictions and transportation restrictions eased, and short-term demand may pick up. Downstream, today's steel spot prices generally fell, of which the average spot price of thread fell by 41 yuan/ton, and the average price of hot coil fell by 42 yuan/ton. The national billet market dropped by 30-120 yuan /ton, and the overall market sentiment was weak.
On the whole, port inventory continues to accumulate, and high supply pressure is obvious. However, the relaxation of short-term production may help demand pick up, and the mentality of the spot market may improve slightly. On the other hand, the reduction in profits of steel mills has made it difficult to significantly improve production enthusiasm. In addition, today, the National Development and Reform Commission has vigorously promoted non-blast furnace ironmaking technology and promoted the all-scrap electric furnace process, which may bury long-term hidden dangers for iron ore demand.
Unilateral: tend to be bearish in the medium term
Spot-Futures Arbitrage: None
Concerns and risks:
1. The implementation strength and scope of the crude steel production restriction policy.
2. Risk of rising sea freight, etc.
Rubber: Port inventory continues to be destocked.
On November 9, the most-active RU contract closed at 13,925 (-60) yuan/ton, the price of mixed rubber reported 12,400 (+25) yuan/ton, and the basis of most-active contract stood at -850 yuan/ton (-40); the open interest of top 20 actively traded long positions was 71,761 (-1,845) lots, the short position was 98,399 (-659) lots, and the net short position was 26,638 (+1,186) lots.
On November 9, the most-active NR contract closed at 11,085 (-60) yuan/ton, the STR in Qingdao Free Trade Zone reported 1,710 (-10) US dollars/ton, the SMR stood at 1,710 (0) US dollars/ton, and the SIR figure was 1,675 (-10) US dollars/ton. The basis of most-active contract reported -381 (-13) yuan/ton.
As of November 5: the total inventory of domestic exchanges was 297,456 (+12,243) tons, and the amount of warehouse receipts of exchanges was 242,250 (+21,930) tons.
Raw materials: Sheet rubber 52.5 (0), cup lump 47.55 (+0.15), latex 52.3 (-0.5), RSS3 55.88 (-0.12).
As of November 4, the operating rate of domestic all-steel tire factories was 61% (+2.57%), and the operating rate of semi-steel tire factories was 56.48% (+1.61%).
Opinion: The price of rubber continued to fluctuate within a narrow range yesterday, and the latest port inventory announced continued to destock. On the one hand, the number of arrivals to the port is still small, and on the other hand, the decline in port inventory last week has increased due to the increase in downstream purchases. The current rubber price operation logic is mainly on the supply side. As the weather in Thailand's main production areas improves and ocean freight rates continue to decline, domestic arrivals will gradually increase, which will weaken the support of the supply side of the rubber price in the early stage. The previous downward trend basically reflects the above changes, and the current demand side is in a stable state. It is expected that the short-term downside of rubber prices will be limited, and the upward drive still needs to wait. Investors are advised to wait for bargain-hunting opportunities after the market stabilizes.
Strategy: Cautiously bullish
Risks: production may increase substantially, inventory may continue to accumulate, and demand may decrease substantially, etc.
Crude oil: The United States has not yet decided to release its strategic reserve stocks.
After the EIA report was released yesterday, the United States has not yet decided to release SPR. This is the second violation of market expectations after the OPEC meeting last week. The current situation of SPR is unclear, and oil prices have returned to their previous highs. If the United States does not rely on actual actions but guides the market through SPR expectations, it will not have the effect of restraining oil prices. We believe that the last two weeks will be the last time window for the US to release SPR. If the U.S. cannot achieve this, then oil prices will return to being dominated by fundamentals. The future winter temperature demand, the epidemic situation and the inventory situation will determine the future trend of oil prices.
Strategy: Neutral, go long of diesel crack spread (Gasoil-Brent）
Risk: The United States releases strategic reserves.
Copper: Coal prices have adjusted back again, affecting the overall sector prices.
Spot: According to SMM, as the main contracts of Shanghai Copper recovered overnight, the inter-month basis narrowed slightly to BACK400 yuan/ton, and holders returned to the supporting sentiment of the price, leading to the return of premiums and discounts in the spot market to the pattern of premiums. Standard-Grade Copper was quoted at a premium of 100 yuan/ton in the morning market. The market was still waiting for holders to lower their quotations after the stalemate as in the past. Although some holders slightly adjusted their prices to a premium of 80-90 yuan/ton, the number of inquiries increased significantly, and low-priced sources were quickly bought. After that, the holders re-tightened the price at a premium of around 100 yuan/ton, leaving almost no room for price reduction. High-Grade Copper quotes were differentiated. Guixi Copper holders maintained a high price supporting sentiment and offered a premium of 180-200 yuan/ton, but there were few transactions in the market. The quotations of other imported brands gradually increased from 140-150 yuan/ton to 160-180 yuan /ton. Compared with yesterday, the spread between High-Grade Copper and Standard-Grade Copper widened to around 80 yuan/ton, making the overall favor of yesterday less than the day before yesterday. Due to the scarcity of supply in the market for Hydro-Copper, the quotation quickly narrowed from a discount of around 100 yuan.
From a macro perspective, the US Energy Information Administration expects that Brent crude oil prices will fall in 2022 as oil production increases. At the same time, it slightly raised its crude oil price forecast for 2021, and generally maintained its oil price forecast for 2022 unchanged. The Biden government may announce the use of strategic oil reserves this week, while seeking other new government tools to stabilize oil prices. According to a Bloomberg report, Gazprom said it is launching a plan to start sending natural gas to five storage facilities in Europe in November to fulfill the promise made by Russian President Putin last month. According to data from the US Department of Labor, the US PPI in October increased by 8.6% year-on-year and 0.6 month-on-month, which was in line with expectations. From the perspective of sub-data, logistics and transportation, material shortages and rising labor costs have driven prices soaring in recent months. Supply chain problems are expected to continue until 2022, and rising production costs will cause prices to rise further in the future.
Domestically, due to the large-scale cold wave weather in recent days, rainfall or snowfall has occurred in many parts of China, and coal production and transportation have been affected to varying degrees. However, the National Development and Reform Commission recently made another move, showing a firm regulatory stance. The National Development and Reform Commission recently instructed Shanxi Province to issue a price-limiting order for the second time in nearly half a month.
On the whole, coal prices have adjusted back again, affecting the overall sector prices. Unilaterally, we maintain the judgment that the market will fluctuate widely and there are downside risks.
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: Processing fees have fallen.
1. Zhejiang Petrochemical PX gradually increased its production load, and PX processing fees continued to be low.
(1) The production load has been reduced to 20% on November 8, and it is planned to start maintenance for 2 months on November 10.
(2) On October 25, Rongsheng issued an announcement that the Ministry of Commerce agreed to arrange the import allowance of 12 million tons of crude oil for non-state-owned trade in the second phase of the Zhejiang Petrochemical Co., Ltd. Refining and Chemical Project in 2021. On November 1, the two PX lines of Zhejiang Petrochemical have been upgraded to full capacity, the supply of PX has gradually recovered, and the subsequent third production line is expected to increase the load, and the PX processing fee has been reduced to a low level on the left.
2. PTA continues the cycle of accumulating inventory.
(1) Hengli 3# 2.2 million tons of Hengli Petrochemical will be overhauled from November 5 to November 25.
(2) The PTA processing fee is once again reduced to around 500.
3. Filament production and sales are insipid.
(1) The production and sales remained stable at 55%.
(2) In October 2021, textile and apparel exports were 28.937 billion U.S. dollars, an increase of 16.47%. Among them, textile exports were US$12.5 billion, an increase of 7.19%; clothing exports were US$16.437 billion, an increase of 24.68%.
Balance sheet outlook: PTA will gradually enter the inventory accumulation cycle from November to December.
(1) Unilateral: PTA and PX processing fees are basically compressed in place, and the correction of crude oil benchmarks is expected to be limited. It is recommended that on unilateral prices, taking a wait-and-see attitude.
(2) Intertemporal: For the 1-5 spread, adopt a reverse arbitrage strategy.
Risks: PTA factory's control over the maintenance rhythm; the load situation of Zhejiang Petrochemical PX; the maintenance time of polyester reduced load.
1. 单边：中性 2. 跨市：暂缓 3. 跨期：暂缓；4. 期权：暂缓
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