Crude oil

Affected by the domestic epidemic's continued worries about falling demand, international crude oil prices continued to fall by nearly 1% overnight, and the US WTI oil price closed below $50 per barrel, maintaining a weak pattern in the short term. However, in response to the expected decline in demand, OPEC+ plans to advance the original March meeting to mid-February, and it is more likely to extend the production reduction agreement or increase production reduction. In general, we believe that after continuous declines in the previous period, there is limited room for oil prices to continue to fall, and long strategies are recommended.

Raw materials of Polyester

Affected by the drop in inertia, the domestic PTA and MEG futures opened lower at the beginning of the day, but then gradually fluctuated and went higher. The main contract of MEG rose to above the daily limit on Monday, and short-term bottom support appeared. From the downstream point of view, the delay in rework of workers and the blocked transportation, which will directly lead to the rapid accumulation of finished product inventories of polyester enterprises and the reduction of the operation load. As far as PTA is concerned, the current industry chain profits have been further compressed, and the PTA spot processing fees have fallen below ¥500 per ton, and the late maintenance may be intensified. From the perspective of MEG, the spot price fell sharply by nearly ¥700 per ton yesterday, and the basis gap narrowed rapidly, and the cash flow of various processes suffered a significant loss. Therefore, in operation, it is advised that investors with no position pay attention to the long position at the bottom and maintain the long strategies in the medium term.

Iron ore

The negative impact of steel is transmitted to upstream raw materials, and the backlog of finished products will restrain steel mills from purchasing. The negative performance of iron ore was the most obvious because the replenishment of steel mills pushed up the ore prices before the Spring Festival. Brazil’s floods caused low shipments in the first quarter, it is still uncertain whether it will recover in the future, and scrap recycling will be affected by epidemic and the supply will shrink. It is advised to be cautious when the price is around ¥600.

Natural Rubber

There were limited offered prices for Qingdao rubber in USD. The spot price and CIF of STR20 was $1,330 to $1,340 per ton. The CIF of SMR20 in August was $1,380 per ton. The CIF of mixed rubber from Thailand in May was $1,360 per ton. Overseas rubber rebounded at the bottom. The main force contract of TF05 rose by 4.2 or 3.26% to 132.9. The main force contract of JUR06 rose by 2.8 or 1.60% to 177.5. The SHFE rubber opened lower and then rebounded. The main force contract of RU05 fell by 100 or 0.94% and closed at 11,040, and the main force contract of NR04 fell by 65 or 0.70% and closed at 9,285.

QinRex: In December 2019, Indonesia exported 191,000 tons of natural rubber, a year-on-year decrease of 2% and a month-on-month increase of 9.9%. From the perspective of various varieties, the exports of standard rubber were 186,000 tons, a year-on-year decrease of 3.1% and a month-on-month increase of 10.1%; the exports of RSS3 increased by 33.3% year-on-year and 2.3% month-on-month; the exports of latex realized year-on-year and month-on-month increase. Indonesian natural rubber exports totaled 2.5 million tons in 2019, a year-on-year decrease of 11%. From the perspective of various varieties, standard rubber exports were 2.44 million tons, a year-on-year decrease of 11%; RSS3 exports decreased by 11.7%, and latex exports increased by 7.7%.

Throughout the whole month of Thailand, the major producing provinces experienced relatively little rainfall, and the output-weighted rainfall was only 0.27mm, which was 11% of the historical average over the same period. In the downstream tire replacement market, it is understood that the January sales volume fell sharply, and weak supply and demand caused little increase in finished product inventories. Due to the epidemic, most brands have postponed the New Year's order meeting, and the re-convening time will depend on the situation on the 15th day of the first month.

Futures Operation Advice: The SHFE rubber opened lower and then rebounded with commodities. As for the main contract of RU05, it is advised to long a slight position and set a stop at the previous low level at 10,950 below.

(For reference only)