Iron Ore: Economic policy information is frequently released, and the future trend should be stabilized.
Affected by the frequent release of national economic policy information last week, the price of iron ore fluctuated significantly along with the price of the overall black products. Affected by the central bank’s reserve reduction and the Central Economic Conference and other macro-positive news, iron ore experienced a strong rise in the first two days, and the 2205 contract reached a peak of 673.5 yuan/ton. However, the market's optimism did not continue, and it began to fall in the next three days, with a minimum of 625.5 yuan/ton. As of the close of last Friday, the final closing price was 636.5 yuan/ton, which was basically the same from the previous day, with a slight drop of 3 yuan/ton. In terms of spot, the lowest price of the four main ports was 699 yuan/ton, an increase of 39 yuan/ton from the previous month, and SSF was 455 yuan/ton, an increase of 36 yuan/ton from the previous month. The Platts 62% US dollar index was US$107, up 8 US dollars from the previous month.
In terms of supply, the total global shipments this period totaled 34.67 million tons, an increase of 3.19 million tons on a weekly basis. Among them, Australia's shipping volume increased by 2.03 million tons from the previous month to 19.86 million tons. Brazil's shipments increased by 580,000 tons from the previous month to 8.04 million tons. Non-mainstream shipments amounted to 6.76 million tons, an increase of 570,000 tons on a weekly basis.
In terms of demand, the capacity utilization rate of blast furnaces in steel plants nationwide last week was 57.26%, a decrease of 0.21% from last week, and a decrease of 20.15% from last year, which is still at a historically low level. The average daily molten iron output was 1.987 million tons, a decrease of 18,000 tons from the previous month and a decrease of 448,000 tons from the same period last year.
On the whole, the supply-demand relationship changed little last week, and the shipment volume increased slightly. Port inventory and port volume were basically the same month-on-month, and the supply side continued to relax. On the demand side, although the profit of steel mills is still at a high level, due to the impact of production restrictions, the production capacity of steel mills has not been able to recover for a long time. The average daily molten iron output is still at a historically low level, and the actual increase in demand is not obvious.
At present, the focus of the black series is on the policy side. Last week, the national economic policy frequently appeared. Regarding the real estate industry’s policy statement, there are not only bullish messages such as currency RRR cuts to release liquidity and a virtuous circle of healthy development, but also bad messages such as insisting on curbing new hidden debts and insisting not to speculate on housing. The Central Economic Work Conference last Friday highlighted the word "stable" in the expression of next year's economic policy. Therefore, it can be seen that although the current real estate industry data has fallen sharply, dragging down the overall weak performance of black products, under the overall goal of "stability", the overall expectation for next year is not pessimistic.
Unilateral: Neutrally bullish
Spot-Futures Arbitrage: None
Concerns and risks:
1. China relaxes or stimulates economic or real estate policies
2. Large-scale production cuts in mines
3. Risk of rising sea freight
Rubber: Port inventory continues to decline, and rubber prices are expected to stabilize.
Last week, the price of rubber was weak and fluctuated. Due to the decrease in rain and the increase in the output of raw materials in Thailand's main production areas, the prices of latex and other raw materials have fallen significantly, and the support of rubber costs has been significantly weakened. However, due to the re-accumulation of finished product inventory, the operating rate of tire factories has rebounded slowly, and the demand for raw material procurement has also slowed down. The weak supply and demand led to the continued weak operation of rubber prices.
The total inventory of domestic exchanges as of December 10 was 215,861 tons (+6578), and the amount of futures warehouse receipts was 175,510 tons (+20980). As of December 5, inventory in Qingdao Free Trade Zone continued to decline, and the rate of decline continued to decrease from the previous month. This is mainly due to the decrease in downstream purchases, but the arrivals in Hong Kong have always been small. As logistics is difficult to solve in the short term, it is expected that it will be difficult to see the turning point of the port's accumulation of inventory at the end of the year.
In terms of downstream tire operating rate, as of December 9, the operating rate of all-steel tire companies was 64.26% (+1.28%), and the operating rate of semi-steel tire companies was 63.77% (+1.6%). The weak demand has led to the re-accumulation of the finished product inventory of the tire factory, which will inhibit the recovery of the operating rate in the later period. However, due to concerns about the future curtailment policy, it is expected that the tire factory will maintain the current operating rate in the short term.
Viewpoint: The price of latex and other raw materials has dropped significantly under the reduced rain in Thailand's main producing areas last week, and the expected decline in demand has also made market prices continue to be weak. In the later period, there was still rain in the main producing areas of Thailand, and the relative strength of the price of cup lump also reflected that the demand resilience still exists. Therefore, it is expected that there is limited room for the price of raw materials to continue to fall. As the market's sentiment towards the mutant virus eases, and the domestic currency is gradually turning to easing, the price of rubber is expected to stabilize. From the perspective of changes in domestic port inventories, due to the short-term difficulty of alleviating the shipping problem, it is expected that the port's accumulated inventory will be difficult to see at the end of the year, so the support logic on the supply side is still there. It is expected that rubber prices are expected to stabilize next week, but the upward drive has not seen more bright spots due to demand, and the overall drive is insufficient. The short-term rebound space may also need to look at the surrounding market atmosphere, it is recommended to try a small amount of long orders at low levels.
Strategy: Cautiously bullish
1. Significant increase in domestic supply
2. Demand continues to weaken due to the epidemic and other impacts
3. Funds are tight
Crude oil: Virus concerns have eased, but the oil market can hardly be reversed.
Oil prices stabilized and rebounded last week. The easing of virus concerns, the deadlock in Iran’s nuclear talks, and China’s RRR cut have boosted oil prices. As far as Omi Keron virus is concerned, with the release of more information, the characteristics of the virus are more inclined to be highly infectious, higher immune escape and lower severe mortality. The possibility of re-blocking within major economies around the world is unlikely, and the market’s previous concerns have eased. From the actual data, in the near future, no matter whether it is the global traffic congestion index or the number of global flights and other high-frequency indicators, there has not been a sharp decline due to the Omi Keron virus, and more are at high levels or stagnant growth. Omi Keron’s impact on real-world oil consumption is not significant or has not yet been fully reflected. However, we believe that the easing of concerns about the virus does not mean a reversal of the crude oil market. We believe that the current round of the market is more of a rebound rather than a reversal. The main reason is that the fundamentals of the oil market will continue to loosen in the first quarter of next year. Although the current absolute level of global oil inventories is low, as the refinery enters the traditional maintenance period, it is expected that the oil market will enter the accumulation inventory cycle in the future. At present, from the perspective of the spread structure, whether it is an inter-month spread, a crack spread, a regional spread, or a premium or discount on physical goods, it has begun to show weakness in the fundamentals in the future. In addition, from the perspective of CFTC positions, fund longs are also quickly withdrawing from the market in the near future. Therefore, on the whole, although the macro and emotional aspects have supported the recent rebound in oil prices, from the perspective of fundamentals and capital, the foundation for rising oil prices is not strong. We believe that the center of gravity of oil prices will be at US$70/barrel before, and the probability of breaking through US$80/barrel again is low.
1. Geopolitical risk in the Middle East
Copper: Long and short factors are intertwined, and the fluctuation pattern of copper prices remains unchanged.
According to SMM news, the average price of SMM 1# Copper Cathode in the week of December 10th ran at 69,765 yuan/ton and 70,000 yuan/ton, showing a weekly volatile trend. The average premium and discount quotation of Standard-Grade Copper runs from a discount of 25 to a premium of 125 yuan/ton, showing a downward trend in the middle of the week. Last week, copper prices fluctuated. The Shanghai Copper 01 contract operated from a minimum of 68,910 yuan/ton to a maximum of 70,240 yuan/ton. It closed at 69,320 yuan/ton on Friday night, a weekly drop of 70 yuan/ton.
From a macro perspective, the Central Bank decided to lower the deposit reserve ratio of financial institutions by 0.5 percentage points on December 15, 2021 (excluding financial institutions that have implemented a 5% deposit reserve ratio). After this reduction, the weighted average deposit reserve ratio of financial institutions was 8.4%. The central bank’s RRR cut released about 1.2 trillion yuan, which means that the marginal relaxation of China’s monetary policy. Looking to the future, domestic economic growth is under pressure, and fiscal expenditures are expected to accelerate. The copper bullish atmosphere is heating up, but the upside of copper prices is limited. China's November CPI annual rate was previously 1.5% and announced 2.3%. From the United States to December 4, when the number of people claiming unemployment benefits was 184,000, which was lower than the previous value of 222,000 and reached the lowest value of the year. The foreign economy is gradually improving, and the domestic economy is advancing steadily, raising market sentiment. The domestic epidemic has rebounded again, and the emergence of cases in many places is expected to have an impact on future production and consumption. However, in the current economic slowdown, employment data has become more resilient. With the employment pressure under control, it is expected that the policy for stabilizing growth in the future will be relatively moderate.
From a fundamental point of view, according to SMM, the operating rate of refined copper rod enterprises was 69.24%, a decrease of 2.15% from last week. It can be seen that downstream demand has weakened at the end of the year. On the one hand, near the end of the year, both downstream cable factories and copper rod companies will choose to control capital risks and appropriately reduce the number of orders. Therefore, the willingness to purchase before New Year's Day will be suppressed to a certain extent. On the other hand, downstream consumption does show signs of weakening. As the north turns cold, orders from engineering and real estate terminals continue to decline, and demand enters the seasonal off-season around the Spring Festival. In addition, due to environmental protection issues during the Winter Olympics in Ningjin, some small wire and cable factories have restricted production or stopped production recently. In terms of copper scrap, the price difference between refined copper and copper scrap remained below a reasonable price difference this week, supporting refined copper consumption. In terms of inventory, LME has accumulated 3,425 tons to 81,775 tons on a weekly basis, and SHFE has removed 1,058 tons to 6,331 tons on a weekly basis. The social warehouse has a weekly storage of 7,400 to 90,100 tons, and the bonded area has a weekly storage of 8,300 to 175,200 tons. In terms of imports, this week's import loss on the 01 contract remained at around 300 yuan/ton, while the spot import profit window was open. However, near the end of the year, many traders said that the annual trade indicators have been reached. In addition, the issue of delayed shipping schedules has continued to appear recently, which has also inhibited the enthusiasm of spot trading.
On the whole, the macro level has released bullish signals, but the overall demand has weakened towards the end of the year. At the same time, the spread between refined copper and scrap copper supports consumption of refined copper, and inventories remain low. Although the LME showed signs of accumulation in the second half of the week, the inventory turning point was still apparent. December 16th will usher in the Federal Reserve FOMC meeting. During this period, copper prices may remain volatile.
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 East China epidemic has caused PTA plants to cut production.
In terms of PX supply, this week’s CCF’s PX China operating rate was 68.5% (+0%), and PX Asia’s operating rate was 71.3% (+0%). Zhejiang Petrochemical’s 9 million tons of PX increased the load to 65% to 70%, and the lifting load was still slow. Zhenhai Petrochemical is currently operating normally and is concerned about the potential impact in the future. Under the background of Zhejiang Petrochemical's under-load, the accumulation rate of Asian PX inventory in December-January is still slow, and PX processing fees are expected to be compressed.
In terms of PTA supply, CCF's PTA operating rate was 71.7% (-3.4%) this week. Due to the epidemic, Zhenhai District was temporarily closed for management. At present, logistics has been affected. Yisheng New Materials' 3.6 million tons equipment is expected to stop production, and the load has been reduced to 50%. The current PTA processing fee is higher than 600, which basically reflects the expectation of a small destocking in December.
In general, the rebound of crude oil oversold drove the aromatics chain to rebound. PX processing fees are basically compressed in place. In December-January, before Zhejiang Petrochemical is under full load, the accumulation rate of inventory is limited, and the space for compression of PX processing fee is limited. However, PTA has a slight destocking expectation in the context of the implementation of full overhaul in December. However, the current PTA processing fee of more than 600 is basically overdrawn, and there is not much room for re-transaction.
(1) Unilateral: take a wait-and-see attitude; At present, PTA processing fees have rebounded to a short-term high, with limited space below. PX Zhejiang Petrochemical's new production capacity has also suppressed processing fees to a low level.
(2) Intertemporal: expect a slight destocking in December, take a wait-and-see attitude.
Risks: The price of crude oil fluctuates sharply; PTA plant maintenance progress; Zhejiang Petrochemical PX new plant production load increase progress; polyester plant joint production reduction progress.
1. 单边：中性 2. 跨市：暂缓 3. 跨期：暂缓；4. 期权：暂缓
1. 累库拐点 货币政策导向 能源危机风险