Iron Ore: The continued accumulation of inventories and the limited production of steel mills have made it difficult to change the medium-term pressure on iron ore.
Steel consumption rebounded slightly last week, but the profit of steel mills was compressed, and iron ore demand did not improve significantly. Although futures and spot prices rebounded following the price of thread and hot-rolled coil, the weak situation under high inventory pressure has not changed. As of Friday’s close, the Iron Ore 01 contract closed at 546.5 points, down 14 points from a week-on-week basis. It once touched 518.5 points and set a new contract price low. In terms of spot, the lowest price of the four main ports was 605 yuan/ton, down 68 yuan/ton from the previous week, and 380 yuan/ton for SSF, which was the same as last week. In terms of basis, both futures and spot prices fell. The Platts 62% U.S. dollar index was 89 U.S. dollars, down 4 U.S. dollars on a weekly basis.
On the supply side, according to Mysteel's statistics, the total global shipment volume was 30.624 million tons, an increase of 334,000 tons on a weekly basis. Among them, the volume of shipments from Australia decreased by 109,000 tons to 18.175 million tons, which was basically stable; the volume of shipments in Brazil increased by 640 thousand tons to 6.319 million tons. Non-mainstream shipments amounted to 6.13 million tons, a week-on-week decrease of 197,000 tons.
In terms of demand, Mysteel surveyed 247 steel mills with a blast furnace operating rate of 71.59%, an increase of 0.69% from last week and a year-on-year decrease of 14.74%; blast furnace ironmaking capacity utilization rate was 75.72%, a month-on-month decrease of 0.71%, and a year-on-year decrease of 16.39%; the profit rate of steel mills was 49.78%, a month-on-month decrease of 22.08% and a year-on-year decrease of 42.86%; the average daily molten iron output was 2.0299 million tons, a month-on-month decrease of 18,900 tons and a year-on-year decrease of 421,900 tons.
On the whole, the global iron ore shipments on the supply side continued to pick up, mainly due to the large increase in shipments from Brazil, while the shipments of Australian and non-mainstream iron ore decreased slightly, and the total supply growth rate narrowed. On the demand side, due to the compression of steel profits, the enthusiasm for production has declined, and the average daily molten iron volume has reached a new low. In addition, Tangshan issued a notice on the 13th that stricter control measures will be taken to deal with the recent pollution process. Shanxi Jincheng also launched an orange warning for heavy pollution, and some steel mills may be affected. On the whole, iron ore port inventory has accumulated for seven consecutive weeks, and high supply pressure is difficult to change in the short term. The profit reduction of steel mills combined with the resurgence of production restrictions in some regions makes it difficult for the demand side to change significantly. Although iron ore prices rebounded slightly last week following the rise in thread and hot-rolled coil, the situation of iron ore under pressure in the medium-term operation is difficult to change as the gap between supply and demand continues to expand.
Unilateral: tend to be bearish in the medium term
Spot-Futures Arbitrage: None
Concerns and risks:
1. Favorable macro policy.
2. The implementation strength and scope of the crude steel production restriction policy.
3. Risk of rising sea freight, etc.
Rubber: The downstream purchases increase, and the price of rubber fluctuates strongly.
Last week, rubber futures prices stopped falling and rebounded, mainly driven by the warming of the market atmosphere, the black series stopped falling, and the news about the loosening of the domestic real estate market in the second half of the week boosted the commodity market atmosphere. From the perspective of its own fundamentals, after the pressure on downstream tire factories has eased due to the transfer of finished product inventory, they have increased the purchase of raw materials to support spot prices.
The total inventory of domestic exchanges as of November 12 was 307,325 tons (+9869), and the amount of futures warehouse receipts was 253,940 tons (+11690). The domestic peak season led to a continued recovery in output, and warehouse receipts continued to increase last week. As Yunnan approaches the stop of delivery, the increase in warehouse receipts will slow down in the later period. As of November 7, inventory in Qingdao Free Trade Zone continued to decline, and the decline increased month-on-month, mainly due to the increase in downstream procurement. In the future, it is recommended to pay attention to the turning point of accumulated inventory.
In terms of downstream tire operating rate, as of November 11, the operating rate of all steel tire enterprises was 64% (+3%), and the operating rate of semi-steel tire enterprises was 60% (+3.52%). The approaching peak season for downstream terminals and concerns about the impact of future power curtailment policies have led to a continuous recovery in operating rates in the near term, and downstream raw material purchases have also increased.
Opinion: Due to the continued delay of rubber shipping schedules, the domestic Qingdao port has not yet seen the situation of concentrated arrivals. At the same time, due to the impact of the epidemic in the near future, the entry of index rubber has also been affected to a certain extent, and the domestic supply pressure is still not large. After downstream tire factories have recently transferred their finished product inventory to distributors, inventory pressure has eased, and the recovery in operating rates has also increased their willingness to purchase raw materials. Supply and demand showed signs of slight improvement, supporting rubber prices. At the same time, the main production area in Yunnan is approaching to stop delivery, and the overall output increase is limited, resulting in limited downward space for raw material prices and limited increase in delivery products. The low domestic inventory may be difficult to alleviate in the short term, and it is expected that rubber prices are expected to maintain strong volatility. It is recommended to maintain a long strategy.
Strategy: Cautiously bullish
Risks: production may increase substantially, inventory may continue to accumulate, and demand may decrease substantially, etc.
Crude oil: The decision of the US to release SPR is pending, and oil prices remain high and fluctuating.
The United States has not yet made a decision on SPR last week. The EIA monthly report on Tuesday showed that the oil market will enter an oversupply next year, and there are still differences within the Biden administration on whether to release strategic reserves. For the United States, what is the current ideal oil price? From the perspective of inflation, gasoline prices have a greater impact on U.S. inflation. According to statistics from the AAA Association, the current average gasoline price in the United States is $3.5 per gallon, the highest in the past five years. Generally, gasoline prices above US$3 per gallon have a very large impact on inflation. If the US government's goal is to keep gasoline prices below US$3/gallon, the corresponding crude oil prices need to be adjusted back to below US$70/barrel. This is when considering the completely linear changes in the prices of gasoline and crude oil, but this is not entirely the case. Since the beginning of this year, US refined oil prices have outperformed crude oil. The main driving force is the strong recovery on the consumer side and the slow recovery of refinery operations this year, making the inventory of refined oil products, including gasoline, at the lowest level in 5-year history. Since the released strategic reserves are crude oil inventories rather than gasoline inventories, from the perspective of the Biden administration, on the one hand, it hopes to lower the price of crude oil, thereby lowering the cost of gasoline production, and on the other hand, it hopes to boost the operating rate of refineries by lowering the price of crude oil. However, in terms of the realization path, the first one is more straightforward, but the second path to increase the operating rate of the refinery still has greater uncertainty. Although releasing of reserves may bring about short-term refinery profits, if companies expect this to be a short-term market dividend, they are not willing to increase the operating rate. That is, releasing reserves will not greatly improve the fundamentals of tight US refined oil products. This means that the effect of releasing reserves will be unsatisfactory, so the Biden government is currently considering other policy tools, such as restricting the export of crude oil and refined oil and relaxing the renewable energy policy to stimulate refinery production. But for now, due to differences within the government, the prospects for the introduction of these policies are doubtful. The biggest problem in the United States is still that the supply of refined oil cannot keep up with consumption. If we only consider releasing reserves from the crude oil side, we believe that this will not significantly improve the fundamentals of refined oil products.
Strategy: Neutral, go long of diesel crack spread (Gasoil-Brent）
Risk: The United States releases strategic reserves.
Copper: Market divergence has intensified, and copper prices may remain volatile.
According to SMM, the average price of SMM 1# Copper Cathode in the week of November 12th ran at RMB 70,600/ton and RMB 71,450/ton, showing a weekly fluctuation trend. The average premium and discount quotation of Standard-Grade Copper runs from a discount of 5 yuan/ton to a premium of 225 yuan/ton, showing an upward trend in the middle of the week. Last week, the price of copper fluctuated upward. The Shanghai Copper 12 contract ran from a minimum of 69,340 yuan to a maximum of 71,260 yuan/ton. It closed at 71,160 yuan/ton on Friday night, a weekly increase of 1,760 yuan/ton.
On the macro level, Russia has already begun to supply gas to Europe, but the political game among Eastern European countries is a disturbing factor. On the 11th, the President of Belarus said that he might consider closing a natural gas pipeline from Russia to Europe. The United States and OPEC are deadlocked on the issue of increasing oil production, after OPEC announced that it would maintain production. The White House has stated that it will not announce plans to release the Strategic Petroleum Reserve (SPR), but according to people familiar with the matter, the crude oil export ban and the refined oil export ban are one of the remedies the White House has prepared. Therefore, the prices of natural gas and crude oil may continue to fluctuate repeatedly, and how the cold weather should be interpreted will play the role of catalyst. In terms of inflation and interest rate hike expectations, with the implementation of the Fed’s Taper, the market is concerned about the trend of interest rate hikes over the past 22 years and needs to continue to pay attention to later inflation data and FOMC meetings. The Baltic Dry Bulk Index (BDI), which is often used as a leading indicator of inflation, has now fallen to its low level in June this year. However, the supply chain, as a key factor of inflation, is still uncertain when it will return to normal. At present, gold and the U.S. dollar have risen together, reflecting the market's divergence on whether inflation is temporary and whether the Fed will adopt unexpected tightening measures such as raising interest rates earlier. On the domestic front, PPI and CPI both rose. From a structural point of view, apart from the impetus of rising vegetable prices, the transmission of PPI to CPI is still going on. The Central Bank Party Committee held a meeting and pointed out that it is better to support the recovery of consumption and investment and curb excessive price increases. Recently, real estate loans from financial institutions have accelerated significantly, the market has released the risk sentiment of the mainland real estate, and the risk appetite has rebounded.
Overall, long and short are intertwined. The current market divergence has deepened, crude oil and natural gas prices have fluctuated repeatedly, and the simultaneous rise of gold and the US dollar reflects the market’s conflicts with regard to inflation. From a fundamental point of view, the operating rate picked up after the domestic power curtailment was relieved, the LME continued to de-stock, and the social database reached a new low. The inventory turning point has not yet arrived, and the volatility of copper prices may remain.
1. Unilateral: neutral
2. Inter-market: postpone
3. Inter-period: postpone
4. Options: postpone
1. Accumulated inventory turning point
2. Monetary policy orientation
3. Energy crisis risk.
PTA: The terminal load is still low, and the downstream negative feedback.
Last Friday compared with this Friday, TA2201 closed at 4998 yuan/ton, +30 yuan/ton from the previous week. In terms of spot, PTA4923 yuan/ton, compared with last week +40 yuan/ton, TA basis is -75 yuan/ton, compared with last week +10 yuan/ton, PTA processing fee is 473 yuan/ton, compared with last week -27 yuan/ Tons; PX is US$922/ton, which is +15 US dollars/ton from last week, and the PX processing fee is US$145/ton, which is +4 US dollars/ton compared to last week.
In terms of PX supply, this week’s CCF’s PX Asia operating rate was 68.8% (-5.3%), and PX China’s operating rate was 69.7% (-2%). The supply of subspecies PX has fallen, and the third production line of Zhejiang Petrochemical’s PX has not been significantly increased the load. The Asian PX accumulation rate from November to December is not large, and the low level of PX processing fee near US$140/ton has basically been compressed.
In terms of PTA supply, CCF’s PTA operating rate of 78.1% (-3.3%) this week is still on the high side. Hengli 3# 2.2 million tons of 11.5 to 11.25 overhauled, Shenghong 1.5 million tons of 11.11 restarted. There are still not many periodic overhauls. Under the background of the inventory accumulation of expectations, the PTA processing fee has been reduced to less than 500 yuan/ton.
In terms of terminal supply and demand, 70% (-12%) of Jiangsu and Zhejiang looms were started, 74% (-5%) of texturing. The dual-control policy in Jiangsu and Zhejiang still exists, and terminal load is under pressure; terminal orders are not performing well, and filaments are restocked. Weak willingness. This week, the pressure on filament inventory continues to increase. This week, POY inventory days are 21 days (+1.4), FDY inventory days are 28.9 days (+1.6), and DTY inventory days are 18.6 days (+3.3). The overall operating rate of polyester is 85.4% (+0.8%), and the operating rate of direct spinning filament is 78.5% (+0%).
Overall, the PX processing fee has been hit to a low level on the left, but the Asian PX storage pressure is not great, and the PX processing fee has limited room for further compression. PTA continues to accumulate inventory expectations from November to December, and the expected reduction of PTA processing fees, combined with the negative feedback of further decline in terminal construction this week, further reduces PTA processing fees to below 500, but it is expected that there is limited room for further compression.
(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.
策略：1. 单边：中性 2. 跨市：暂缓 3. 跨期：暂缓；4. 期权：暂缓
关注点：1. 累库拐点 货币政策导向 能源危机风险