Last Friday, the high profile OPEC+ meeting broke up, and then international oil prices plummeted by nearly 10%. However, Saudi Arabia sharply reduced the discounts on sales to Asia, the United States, and Northwest Europe in the weekend, and plans to increase the average daily output of crude oil in April to more than 10 million barrels. These news caused a fatal blow to yesterday's oil prices. Brent and WTI oil prices plummeted by more than 30%, and reached the lowest level since February 12, 2016, with only a low distance from the bottom in January. In the case of a significant shock on the demand side, the cancellation of production restrictions by oil producing countries in April will lead to a sharp increase in pressure on oversupply. Generally speaking, without significant interference between the supply and demand sides, oil prices may remain low and volatile for a longer period of time. However, the possibility of re-engagement between Saudi Arabia and Russia still exists.
Raw materials of Polyester
Affected by the plunge in crude oil, the futures price of domestic polyester raw material all dropped to the daily limit yesterday, and the impact of systemic risks was particularly obvious. Yesterday, the spot prices of domestic PTA and MEG dropped sharply by more than ¥450 per ton, and the quoted prices were ¥3,690 per ton and ¥3,735 per ton, which were significantly lower than the price of the main 2005 contracts. Taking into account the decline in crude oil and the decline in spot prices, today's PTA and MEG main contract futures prices may continue to be closed at the limit, and once again hit a record low. However, we believe that the plunge caused by the systemic risk of crude oil may be significantly released after the continuous decline in the price of polyester raw materials. It is advised to wait for the market to stabilize before operating.
Sentiment in the iron ore market has fluctuated sharply recently. In general, favorable conditions have been included in the price after the initial price rebound, and there were scarce speculation opportunities. As reality contradictions come closer, the price may return to the fundamentals of real supply and demand. In the short term, with the overhaul of blast furnaces at large domestic and foreign steel mills, competition in the iron ore seller market has increased, and the contradiction between the actual inventory turnover of steel mills may also be transmitted upwards recently, so the fundamentals are bearish in the medium term. It is advised to focus on the impact on the future price from big changes in the major funds’ positions. At present, the port price of golden bubba powder is equivalent to ¥670 per ton, and the futures price was at a discount of about 4.5%.
Overseas rubber rebounded at the bottom. The main force contract of TF05 fell by 4.0 or 3.06% to 126.9. The main force contract of JUR08 fell by 10.5 or 6.24% to 157.8. The SHFE rubber opened lower and fluctuated. The main force contract of RU05 fell by 610 or 5.60% and closed at 12,290, and the main force contract of NR05 fell by 555 or 6.03% and closed at 8,650. The quoted price for Qingdao rubber in USD fell by $40 to $50 per ton with scarce inquiries. The quoted price of RSS3 was $1,600 per ton. The spot price or CIF of STR20 was $1,270 to $ 1,280 per ton. The CIF of SMR20 in August was $1,320 per ton. The CIF of mixed rubber from Thailand in July was $1,290 to $1,300 per ton.
Tire World: On March 3, Zhejiang Province held the eighth batch of inauguration ceremony of improving effective investment. The Rebuilding and Expansion and Storage Supporting Project of Chunqiu Plant of Zhongce Rubber (Jiande) has participated in this event. The total investment of the project is 3.56 billion yuan, and the construction period is 2 years. Its construction site is located in Chunqiu Village, Xiaya Town, Jiande City, Zhejiang Province, with a total land area of 820 mu and a construction area of 660,000 square meters. After the project is completed, the Zhongce Rubber (Jiande) Chunqiu Plant can produce an annual output of 6.7 million sets of high-performance all-steel radial tires and tubeless radial tires.
In terms of synthetic rubber, the price of BR has continued to decline since the Spring Festival and is currently running to its lowest point in 5 years. Under the bearish sentiment of the cost of international crude oil, there is still space for weakness. The downstream tire production line started to resume gradually, but the growth rate of output was slower than that of delivery, and the overall finished product inventory declined.
Futures Operation Advice: Affect by the plunge in crude oil, the SHFE rubber opened at the down limit and hit the limit once again during the day. As for the main RU05 contract, it is advised to long a slight position and set a stop at the recent low level at 10,000 below.
(For reference only)