Crude oil

Affected by the spread of the epidemic outside China, international crude oil fell sharply by nearly 4% overnight. In addition, the plunge in European and American stock markets and the surge in gold both indicate that investors' risk aversion is heating up. Due to the rapid rise of confirmed cases of new pneumonia in Japan, South Korea, Italy, and Iran, the market is worried that this will become a global epidemic, and its worries about the future demand for crude oil have risen again. Overall, we believe that the bearish sentiment in the market is still heavy in the short term. However, we need to pay more attention to the statement of OPEC+.

Raw materials of Polyester

Affected by the drop of crude oil last Friday, the domestic polyester raw materials failed to continue the upward trend yesterday, and the future price fell under pressure. From the demand side, it is still in a slow recovery process, and the terminal production and sales rate was only about 20% yesterday. As far as PTA is concerned, the spot processing fee was about ¥390 per ton yesterday, but the futures processing cost of the 2005 contract was still ¥550 per ton, which puts selling pressure on the contract. From the perspective of MEG, the port inventories of East China region announced yesterday rose again to 730,000 tons, an increase of 90,000 tons from last week, and the absolute volume is still near the past average. In general, we believe that PTA and MEG may be under pressure due to the decline in oil prices. However, given the rebound in demand and the low profits of factories, the room for price decline is also limited. In terms of operation, it is advised to temporarily hold the long position bought at the bottom previously.

Iron ore

Funds on the iron ore futures have obvious disagreement. Fundamentally, there is no major pressure on the supply side to provide conditions for speculation, but as prices rebound, favorable conditions are gradually included in the price. The main focus in the later period is whether steel mills will effectively reduce production. Judging from the current market structure, steel mills are constrained by capital turnover pressure to compress raw material purchases. However, under the state of profit margins of steel mills, the reduction in production is still not obvious, resulting in the contradiction of demand for iron ore is still not prominent, but the pressure on the steel side is gradually approaching. From a price point of view, the current market valuation of spring demand after the epidemic is already high. Therefore, it is advised to turn bearish after the speculation sentiment weakens or the pressure of steel appears.

Natural Rubber

It was the Emperor’s Birthday yesterday and the local market was closed. The main force contract of TF05 fell by 4.1 or 2.97% to 133.8. The SHFE rubber went weak. The main force contract of RU05 fell by 320 or 2.73% and closed at 11,400, and the main force contract of NR04 fell by 280 or 2.84% and closed at 9,580. The quoted price for Qingdao rubber in USD dropped with scarce inquiries. There was no effective quoted price of RSS3. The spot price or CIF of STR20 was $1,375 to $1,380 per ton. The CIF of SMR20 in June was $1,405 per ton. The CIF of mixed rubber from Thailand in May was $1,400 to $1,405 per ton.

Citing data from the Japan Automobile Dealers Association: In January, the Japanese auto market sold a total of 360,100 vehicles (including mini-cars with a displacement below 0.66 liters), a year-on-year decrease of 11.7%. This is the fourth consecutive month of double-digit declines in the Japanese auto market since the consumption tax in Japan increased to 10% in October 2019. The previous declines were 24.9%, 12.7%, and 11.0%, while that in January has narrowed obviously. However, sales dada was not optimistic. From historical data, sales in January were the lowest in the Japanese auto market over the past nine years, only higher than 305,100 in 2010. This seems to indicate that 2020 will be a more difficult year for Japanese cars.

The outbreak of COVID-19 overseas has increased market concerns about economic growth and crude oil demand, and the cost of synthetic rubber has come under pressure. After the Spring holiday, SBR price has fallen by ¥1,500 per ton and fell below the mark of ¥10,000. The wait-and-see attitude of market is obvious. The downstream tire production line's export orders, which are mainly previous backlog orders, have a support for the overall sales volume, and replacement demand is relatively weak.

Futures Operation Advice: The SHFE rubber slumped like the trend of oil and nonferrous futures.. As for the main contract of RU05, it is advised to wait and see and pay attention to the support at the recent low level at 11,320 below.

(For reference only)