Crude oil

Under the pressure of the continued spread of the epidemic, international crude oil fell again overnight, and oil prices hit a new low for more than a year. Worries about the decline in demand still persist. Judging from the current news, the global spread of new coronavirus pneumonia is difficult to stop, which will greatly impact the demand for crude oil. Only the supply side can adjust the demand to hedge the decline in demand, and form a bottom support for oil prices. The date of the OPEC+ meeting on March 5 is approaching. Under the situation of continuous decline in oil prices, according to historical experience, the organization is more likely to deepen the production reduction agreement. Overall, we believe that the bearish sentiment in the market is still obvious in the short term, but the role of the supply side cannot be ignored when the oil price is relatively low. Unless the epidemic explodes again, there is limited room for oil prices to fall sharply again.

Raw materials of Polyester

Affected by the continuous decline in crude oil, the main PTA2005 and MEG2005 contracts fluctuated downwards yesterday, and both approached the integer mark of ¥4,400 per ton. From the perspective of the demand side, some polyester enterprises have recently restarted their equipment under maintenance, and the terminal production and sales rate has slowly increased, but the trend of gradual recovery of demand will not change. From the perspective of the supply side, the current PTA and MEG production companies' maintenance scale are still relatively small compared to downstream polyester companies, and the pressure on accumulated inventory is still obvious. However, at this stage, profits in all process have been greatly compressed, and companies with weak competitiveness are under pressure be eliminated. 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

Yesterday, the two blast furnaces of Shougang and Ansteel announced the overhaul and the news of the blast furnace overhaul and shutdown of Posco in Korea and Nippon Steel Corp in Japan, promoted the decline in iron ore swap and futures price. Tangshan's short-term restrictions on sintering further promoted the scope of production reduction, and the platts index followed and went down. From a fundamental point of view, the favorable conditions will gradually be included in the price after the rebound in prices. With the effective reduction of production by steel mills, the speculation of iron ore may come to an end. The decline in demand caused by the reduction in steel mills’ production and the epidemic’s concern about the decline in the total international demand for iron element have an increasing impact on futures and make the market fluctuated. In terms of operation, it is advised to focus on the fluctuation caused by the disturbance of funds.

Natural Rubber

Overseas rubber fluctuated weakly. The main force contract of TF05 fell by 2.5 or 1.84% to 133.3. The main force contract of JUR07 fell by 2.2 or 1.21% to 180.1. The SHFE went lower. The main force contract of RU05 fell by 220 or 1.91% and closed at 11,325, and the main force contract of NR04 fell by 180 or 1.85% and closed at 9,535. The quoted price for Qingdao rubber in USD fell by $10 to $20 per ton. The quoted price of RSS3 was $1,610 per ton. The spot price or CIF of STR20 was $1,375 to $1,385 per ton. The CIF of SMR20 in June was $1,380 per ton. The CIF of mixed rubber from Thailand in May was $1,390 per ton.

Tire World news: On February 23, the Shandong Provincial Department of Finance issued four financial incentive policies to reward enterprises and projects for resumption of work, operation and production, financial security and transportation security. Reward for resumption of work is a major benefit for tire companies in Shandong, because a number of tire companies in Shandong are the province's major projects and new growth drivers. Enterprises that meet production requirement and guarantee transportation will also be rewarded. And incentives for the acceleration of resumption of work increased.

In terms of synthetic rubber, since the domestic synthetic rubber trade with Japan and Korea is mostly based on long-term contracts, the epidemic has not affected the supply of the two countries. Looking back from 2015 to 2019, China's imports of SBR from Japan and Korea have not changed much from 39.4% to 39.7% of the total, while imports of BR have decreased from 57.6% to 36.9% of the total.

Futures Operation Advice: The SHFE rubber was relatively weak like the trend of agricultural futures. As for the main RU05 contract, it is advised to focus on the support at the recent low level at 11,220 below.

(For reference only)