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Daily morning for Crude oil, PTA, natural rubber, iron ore, copper Iro (ZH & EN) 2021.11.19

Fang submitted 2021-11-19 10:51:45

Iron Ore: Steel consumption is weak, and the iron ore futures and spot markets will experience another cold winter.

Logic and perspective:

Yesterday, the Steel Union announced the production, sales and inventory of five building materials commonly used in construction this week. The data shows that the total consumption of the five major materials is 9.47 million tons, an increase of 20,000 tons on a weekly basis. Among them, the thread consumption decreased by 30,000 tons, and the hot-rolled coil consumption decreased by 40,000 tons.The current time is an absolute peak season, but the performance of this group of data is significantly lower than market expectations, leading to an increase in the weak trend of iron ore in the afternoon. At the close, iron ore futures closed at 511.5 yuan/ton, down by 26 yuan/ton from the previous trading day, and hit a new low. In terms of spot, the price of imported iron ore at Caofeidian Port: PB fines was 567 yuan/ton, down 23 yuan/ton from the previous day; SSF was 362 yuan/ton, down 13 yuan/ton from the previous day; market trading sentiment was relatively insipid. In terms of transactions, a total of 865,000 tons of iron ore mines in major ports nationwide were traded, up 25.4% month-on-month. A total of 340,000 tons of forward spot transactions (2 transactions), a month-on-month decrease of 38.2%. In terms of basis, PB fines was around RMB 120/ton, and SSF was around RMB 40/ton. The overall change was little.

On the whole, due to the country's strict control over the real estate industry, steel consumption has experienced a cliff-like decline since the third quarter. With the rapid decline in steel prices, the profits of the long-term process are rapidly compressed until they fall near the cost of the steel plant, and even losses occur, resulting in extremely bearish raw material prices. Due to the decline in the full variety of spot products, the delivery grade of iron ore may be switched from the original SSF to JMBF, PB, or Newman. The brand premium of iron ore is the spread between the medium-to-high grade and the low grade, which is about 70-80 yuan/ton. As a result, JMBF is about to become the best delivery grade of iron ore, which further opens up the downside for iron ore.


Unilateral: go short when prices hit high levels

Arbitrage: None

Spot-Futures Arbitrage: None

Options: None

Inter-period: None

Cross-species: None

Concerns and risks:

1. The state stimulates the economy.

2. The introduction of friendly real estate policy.

3. Risk of rising sea freight, etc.

Rubber: The market atmosphere is weak and rubber prices are under pressure.

On November 18, the most-active RU contract closed at 14,390 (-225) yuan/ton, the price of mixed rubber reported 12,875 (-75) yuan/ton, and the basis of most-active contract stood at -815 yuan/ton (0); the open interest of top 20 actively traded long positions was 63,619 (-587) lots, the short position was 87,711 (+1,385) lots, and the net short position was 24,092 (+1,972) lots.

On November 18, the most-active NR contract closed at 11,375 (-205) yuan/ton, the STR in Qingdao Free Trade Zone reported 1,780 (-15) US dollars/ton, the SMR stood at 1,775 (-15) US dollars/ton, and the SIR figure was 1,755 (-15) US dollars/ton. The basis of most-active contract reported -178 (+86) yuan/ton.

As of November 12: the total inventory of domestic exchanges was 307,325 (+9,869) tons, and the amount of warehouse receipts of exchanges was 253,940 (+11,690) tons.

Raw materials: Sheet rubber 54.25 (-0.1), cup lump 48.8 (-0.4), latex 55.5 (+1), RSS3 57.19 (-0.46).

As of November 11, the operating rate of domestic all-steel tire factories was 64% (+3%), and the operating rate of semi-steel tire factories was 60% (+3.52%).

Opinion: The weakening of copper yesterday may indicate a pessimistic outlook on the future. The weak market atmosphere has hindered the further rebound of rubber prices. At the same time, the weakness of crude oil prices will also drag down the future expectations of synthetic rubber prices, making the support of the strong synthetic rubber prices in the early stage for rubber gradually disappearing. From the perspective of the supply side, the recent re-entry of index rubber has mainly eased the expectation of tight domestic supply. However, port logistics has not yet been resolved, and inventory continues to be destocked. It is expected that the room for adjustment of rubber prices is limited.

Strategy: Cautiously bullish

Risks: production may increase substantially, inventory may continue to accumulate, and demand may decrease substantially, etc.

Crude oil: The United States may coordinate multi-country joint release of reserves, but the outlook is still uncertain.

Although the United States has proposed a joint release of strategic reserves to many countries, the attitude of Japan, South Korea and other countries is still unclear. The IEA stated that its coordination of member states to release strategic reserves is more for responding to emergency supply disruptions than for regulating oil prices. Japan and South Korea have also expressed similar demands. It is still ambiguous whether to agree to the proposal of the United States to release reserves in the future. Both China and India have released reserves this year. According to market sources, in the future, China may conduct a second round of State Reserve auctions at the end of this year, with potential releases ranging from 10 to 15 million barrels. However, we believe that China's release of national reserve stocks needs to be replenished next year or in the future, so the impact on prices is relatively short-term. In the medium term, China still needs a new round of inventory replenishment. On the whole, we believe that the United States still has many difficulties in coordinating the multi-country joint release of reserves. Even if it is actually implemented in the future, the intensity may be lower than market expectations.

Strategy: Neutral, go long of diesel crack spread (Gasoil-Brent

Risk: The United States releases strategic reserves or adopts other policies to curb oil prices.

Copper: The shortage of stocks intensified, and the LME ushered in the inventory again, which led to a rebound in copper prices.

In terms of spot: According to SMM, some holders of Standard-Grade Copper in the morning market started to offer a premium of 980 yuan/ton, and this batch of sources was immediately sold out when they entered the market. Upon seeing this, the holders raised their quotations to more than 1,000 yuan, which quickly reached a premium of 1150 yuan/ton, but it was still difficult to discourage buying in the market. After the holders again raised the premium to 1,300 yuan/ton in the second period, market transactions slowed down, and the market's rising price sentiment eased. High-Grade Copper and Hydro-Copper also followed the quotations of Standard-Grade Copper all the way up. High-Grade Copper also offered a premium of 1,200-1250 yuan/ton in the morning market. After the second period, the quotation gradually rushed to a premium of 1,400-1450 yuan/ton, but the overall market favor was limited, and the market trading activity was obviously not as good as that of Standard-Grade Copper. A small amount of Hydro-Copper was quoted at a premium of 700 yuan/ton in the morning. After being sold out by the downstream, the premium remained at 900 yuan/ton. After the second period, Hydro-Copper also followed the rising price of Standard-Grade Copper and reported a premium of about 1150 yuan/ton, but the buying interest in the downstream dropped significantly under the high premium pattern, returning to a cautious wait-and-see attitude.


On the macro front, traders bet that the European Central Bank will remain accommodative for the next two years, and the money market will postpone the ECB’s first interest rate hike until February 2023. Although there was news that the United States called on other countries to release strategic oil reserves to jointly suppress oil prices, the White House Press Secretary also confirmed that they had discussed working with other countries to meet the needs of the oil supply market. However, international crude oil rebounded, breaking away from the low since early October set on Wednesday. Recent manufacturing surveys conducted by the Philadelphia and New York Fed have shown that inflationary pressures continue to accumulate as demand continues to strengthen and further pressures the supply chain. New York Fed President Williams said that although some price increases are related to the epidemic and imbalances between supply and demand, there are also price increases in other areas such as housing. Atlanta Fed President Bostic said that based on current forecasts, it is suitable to start raising interest rates next summer. The US House of Representatives will vote on Biden's $2 trillion economic plan today. After the House of Representatives passes, the bill will be submitted to the Senate, and there are still uncertainties in the scale and timing of its implementation.

On the whole, the shortage of goods has intensified, and the LME will usher in the inventory again and lead to a rebound in copper prices. Unilaterally, we maintain the judgment that the market will fluctuate widely and there are downside risks.


1. Unilateral: Cautiously bearish

2. Inter-market: postpone

3. Inter-period: postpone

4. Options: postpone

Focus point:

1. The Fed's monetary policy orientation

2. The trend of the US dollar index

3. Policy risks may increase.

PTA: Crude oil drives the price of PTA to pull back.

1. PX processing fees rebounded from low levels.

(1) The third production line of Zhejiang Petrochemical PX still has not significantly increased the load. India OMPL started to overhaul. Asia's PX accumulated inventory rate in November-December was not large; The PX processing fee has been compressed in place on the left and rebounded from the low this week.

2. PTA processing fees continue to be weak.

Currently, there are not many PTA overhauls. PTA processing cost is lowered to 450 or less. Under the background of low processing costs, Yisheng Dahua 225 and Hengli 250 have follow-up maintenance plans.

3. The production and sales of filaments have fallen.

(1) Filament production and sales fell back to 40%. (2) The dual control policy still exists in Jiangsu and Zhejiang, and the terminal load is under pressure. Poor performance of terminal orders.

Balance sheet outlook: PTA will gradually enter the inventory accumulation cycle from November to December.

Strategic recommendations:

(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: Potential overhauls of PTA factories under the background of low processing fees; the load situation of Zhejiang Petrochemical PX; the maintenance time of polyester reduced load.
































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