Iron Ore: Steel production continued to recover, and iron ore futures returned to 700 points.
Logic and perspective:
Yesterday, the Steel Union announced the production and sales of the five building materials commonly used in construction this week. The data shows that the total output of the five major materials is 9.28 million tons, an increase of 240,000 tons on a week-on-week basis. Among them, the thread output was 2.81 million tons, an increase of 110,000 tons on a week-on-week basis. The production of hot-rolled coils was 3.06 million tons, an increase of 90,000 tons on a week-on-week basis. The output has recovered slightly for two consecutive weeks. The resumption of production at the steel plant has been confirmed and has been recognized by the market. In terms of consumption, the consumption of the five building materials commonly used in construction this week was 9.09 million tons, an increase of 40,000 tons on a week-on-week basis. In the traditional off-season, steel consumption rose instead of falling, which greatly increased the drive for raw materials to rise. Yesterday, iron ore futures remained strong, and the main 05 contract regained its 700 points. As of the close, the iron ore 2205 contract closed at 717 yuan/ton, up 22 yuan/ton from the previous day. In terms of transactions, a total of 1.58 million tons of iron ore mines across the country were traded, and a total of 1.49 million tons of forward spot transactions (11 transactions).
On the whole, the Central Economic Work Conference requires all regions and departments to take the responsibility of stabilizing the macro economy and actively introduce policies conducive to economic stability. The crude steel production restriction task has been completed ahead of schedule, and it is expected that the future production restriction will become more moderate. Although iron ore is still in a state of high inventory, if the consumption of thread and hot-rolled coil continues to improve, it is expected to be quickly transmitted to the mine end (destocking) after the release of output control. Long-flow steel mills’ immediate profits are still high, coupled with the steel mill’s expected resumption of production and restocking before the Spring Festival, it is still expected to boost ore prices.
Unilateral: fluctuate at high levels
Spot-Futures Arbitrage: None
Concerns and risks: The implementation strength and extent of the crude steel production restriction policy, the risk of rising ocean freight, etc.
Rubber: The basis of the standard product strengthened slightly.
On January 6, the most-active RU contract closed at 14545 (-205) yuan/ton, the price of mixed rubber reported 13050 (-50) yuan/ton, and the basis of most-active contract stood at -795 yuan/ton (+105); the open interest of top 20 actively traded long positions was 108114 (-61) lots, the short position was 167099 (+1958) lots, and the net short position was 58985 (+2019) lots.
On January 6, the most-active NR contract closed at 11470 (-240) yuan/ton, the STR in Qingdao Free Trade Zone reported 1,775 (-15) US dollars/ton, the SMR stood at 1,770 (-10) US dollars/ton, and the SIR figure was 1,785 (-15) US dollars/ton.
As of December 31: the total inventory of domestic exchanges was 230855 (+2800) tons, and the amount of warehouse receipts of exchanges was 208410 (+1820) tons.
Raw materials: Sheet rubber 53.55 (0), cup lump 47.05 (+0.4), latex 52.8 (+1.3), RSS3 57.8 (-0.13).
As of December 23, the operating rate of domestic all-steel tire factories was 61.72% (-2.14%), and the operating rate of semi-steel tire factories was 63.7% (-0.05%).
Opinion: As the downstream enters the off-season, especially domestic tire factories are expected to gradually reduce production load in the middle of this month, short-term weak demand will put rubber prices under certain pressure. Therefore, the domestic port inventory as of last weekend continued to destock, but the decline has slowed down. At present, the problem of delayed shipping schedule has not been clearly resolved, and the market generally predicts that the turning point of accumulated inventory will be after the Spring Festival holiday. At present, the fundamentals of rubber have not changed much, and the supply pressure is not much. The weak demand and the improvement in demand expectations after the year will make the market price fall limited, and there might be an increase in the medium term. It is expected that market prices will maintain a volatile pattern, and investors are advised to adopt bargain-hunting strategies.
Strategy: Cautiously bullish
1. Epidemic recurring
2. The spread between futures and spot prices continues to widen
3. Weak demand
Crude oil: The market is concerned about supply disruptions in oil-producing countries.
The recent supply situation in Libya and Kazakhstan has caused market concerns, and geopolitical premiums have once again returned to the oil market. In Libya, previous production was 1.1 million barrels per day. At present, due to the shutdown of oil fields, production has fallen by nearly 500,000 barrels per day. In Kazakhstan, due to public protests against rising fuel prices, domestic riots have been triggered, and the riots have spread to oil cities in the west. Chevron said it will temporarily change the output of the Tengiz oil field, and the current impact on actual production needs to be further clarified. Kazakhstan’s crude oil production is about 1.6 million barrels per day, and its crude oil is mainly supplied to European refineries, especially the Mediterranean. Therefore, supply disturbances in Libya and Kazakhstan are the most beneficial to Brent Oil. From the perspective of recent performance, the inter-month spread structure of Brent Oil is also significantly stronger than that of U.S. Oil and Dubai. However, we still need to pay attention to geopolitics and the continuity of sudden supply disruptions. If the impact on supply exceeds expectations, we believe that OPEC may increase production in the future.
Strategy: tend to be neutrally bullish in the short term; Oil prices are currently at the upper edge of the range, investors can go short positions in the medium term
Risk: Geopolitical risk in the Middle East
Copper: Copper: The Fed's hawkish voice continues, and copper prices fluctuate at low levels.
On the macro side, after the Fed’s meeting minutes released hawkish signals, the yields of European and American bonds continued to rise, with the benchmark 10-year U.S. bond yields stabilizing above 1.70%, continuing to refresh their nine-month highs. The 10-year German bond yield rose to its highest level since May 2019. The U.S. dollar index rose slightly overall, close to the intraday high since late December last year, stabilizing above 96. St. Louis Fed Chairman Brad said that the Fed may raise interest rates for the first time in March and then begin to shrink its balance sheet. Given the current standing repurchase arrangements, the balance sheet may even fall below the pre-epidemic level. If inflation eases, interest rate hikes can be slowed down in the second half of the year. San Francisco Fed Chairman Daly also believes that the normalization of the balance sheet will be carried out after raising interest rates. She said that for a long time, the inflation rate has been higher than its acceptable level.
From a fundamental point of view, Shanghai copper fell, and downstream purchases and traders performed more positively. In addition, the import window continued to be closed, and the premiums and discounts of Shanghai copper rose under the tone of tight supply. Guangdong's electrolytic copper inventory continued to decline slightly, but it was still above 10,000 tons. Due to the limited supply of tradable supplies, the premium of South China Copper rose sharply. In terms of scrap copper, the spread between refined copper and scrap continued to stay above a reasonable range. In terms of imports, LME0-3 continued to have a Back structure, the import window was closed, and market trading continued to remain insipid. In terms of inventory, LME destocks, and SHFE maintains the inventory level of the previous trading day.
On the whole, the Fed’s hawkish voice continues and copper prices fluctuate.
1. Unilateral: neutral
2. Inter-market: postpone
3. Inter-period: postpone
4. Options: postpone
1. Inflection point of inventory
2. The trend of the US dollar index
3. The risk of the epidemic may increase.
PTA: PX and PTA processing fees continue to be firm.
1. PX processing fees rebounded strongly.
(1) Under the background of low processing costs in the early stage, most of the Korean installations have reduced the production load to around 70% - 80%. India's OMPL restart is postponed. Hengli's 4.75 million tons of PX production capacity has been reduced by 15-20% on December 23, and the recovery time is yet to be determined. Zhejiang Petrochemical's PX 9 million tons production load is still 65% to 70%, and the speed of increasing the production load is still slow. Under the background of Zhejiang Petrochemical's under-full load, Asia's PX will slightly destock from January to February, and PX processing fees rebounded strongly.
(2) Zhejiang Petrochemical's 2 million tons production capacity restart plan was postponed to mid-January.
2. PTA processing fees are still supported.
(1) The PTA operating rate has returned to a short-term high, and Hengli’s progress in signing the long-term contract next year is still slow. If the signing is still not successful in January, the circulation of subsequent traders may be tightened, and the PTA processing fee will be supported.
3. The terminal production load is still low, but the progress of the filament production reduction is not as good as expected.
Balance sheet outlook: It is expected that it will enter the seasonal accumulation phase in January, but the accumulation rate of inventory is controllable.
(1) Unilateral: Cautiously bullish. PTA processing fees are still strong in the short term, and PX processing fees continue to rebound.
(2) Intertemporal: take a wait-and-see attitude.
Risks: The price of crude oil fluctuates sharply; PTA factory long-term contract signing progress; Zhejiang Petrochemical PX new plant production load increase progress; polyester plant joint production reduction progress.
1. 单边：中性 2. 跨市：内外反套 3. 跨期：暂缓；4. 期权：暂缓
1. 库存拐点 2.美元指数走势 3.疫情风险加剧