Crude oil

At present, the market is still focusing on the prospects of OPEC's production cuts. If the reduction in OPEC's output is compared to surgery, it is undoubtedly successful from the rebound of oil prices. OPEC exports fell by nearly 5.5 million barrels per day in May, but the side effects are also very large, that is, the profits of global refineries are severely damaged. The current crude oil forward curve structure is close to back but the refined oil forward curve is still contango. The diesel crack spread continues to fall to a new low for many years. In addition, in the short term, although crude oil inventories have begun to peak and fall, the destocking of refined oil inventories have slowed down and even continue to accumulate. The current single production cut has not been able to solve the core contradictions accumulated in the industrial chain. We believe that the rise in oil prices in the medium term still requires the destocking of the entire industry chain brought about by the recovery of demand, rather than the artificial price increase. In terms of operation, it is advised to maintain the neutral strategy.

Iron Ore

The position on I2009 contract increased by 10,221 lots and closed at ¥751 per ton, the position on I2101 contract decreased by 2,483 lots and closed at ¥682 per ton.

【Important Information】

1. According to foreign media reports, the Koc Metalurji steel mill in Iskenderun, Turkey, decided to postpone the suspension for a month. The KM steel plant had previously decided to stop production on April 7 and resume production in June. However, in view of the current demand impact of Covid-19 and many uncertainties, the company announced that it would postpone the decision to suspend production for another month. The resumption date depends on market conditions. The annual production capacity of molten iron in KM steel plant is 1.2 million tons, and the annual production capacity of rebar is 550,000 tons.

2. According to foreign media reports, the mining company Sukhaya Balka of the Ukrainian DCH Group produced 208,000 tons of iron ore in April. It is reported that during the period from January to April this year, the company's iron ore output decreased by 3.7% year-on-year to 875,000 tons.

3. According to the data released by the first commercial vehicle network, in May, the domestic heavy truck market is expected to sell about 175,000 vehicles of various types, down 8.5% month-on-month and up 62% year-on-year. From January to May this year, the cumulative sales of the heavy truck market exceeded 640,000 units, a cumulative increase of 16% year-on-year.

4. In terms of spot, the PB powder in Rizhao Port is ¥770 per ton, and the golden bubba powder in Rizhao Port is equivalent to ¥817 per ton.

【Trading Strategy】

1. Arbitrage: The shipments in Australia and Brazil both declined slightly this week. The epidemic situation in Brazil is still serious. It is expected that the later shipments are hard to reach the same level as last year. However, the seasonality in June has impulse expectations, and the overall supply may rebound slightly. At present, the growth rate of molten iron production has slowed down significantly. In June and July, some weekly accumulations may occur, which may drive the margin upward or weaken. It is recommended to reduce the position on 9-1 cash and carry arbitrage strategy and wait and see.

2. The upward drive of iron ore has weakened, and the current high level is volatile. It is recommended to wait and see and maintain the option strategy.

PTA

Upstream factories did not continue to repurchase, and the polyester production and sales turned weak.

The estimated balance sheet in June and July is still accumulating rapidly under the current high inventory background. Under the background of polyester export demand suppressed by the epidemic, it is necessary to lower the PTA processing fee to prompt PTA to reduce production to rebalance. In terms of operation, it is advised to wait and see for unilateral strategy; for the strategy across varieties, it is estimated that the accumulated inventory of PTA will continue in May and June, and its performance will be weak; for basis trading and strategy across period, it is advised to focus on the basis adjustment ability of mainstream factories in the short term, which may provide good opportunity for reverse cash and carry arbitrage. It is advised to focus on the risks of unilateral volatility of recent crude oil prices, the turning point of the epidemic situation in the external market, the possibility of non-profit maintenance under the high production concentration of the PTA plant and the downstream restock space.

Natural Rubber

Overseas rubber retreated slightly. The main force contract of TF09 fell by 0.2 or 0.17% and closed at 117.9. The main force contract of JRU10 fell by 0.2 or 0.13% and closed at 152.8. The SHFE rubber fluctuated and was relatively strong. The main force contract of RU09 rose by 85 or 0.83% and closed at 10,385. and the main force contract of NR09 rose by 85 or 0.97% and closed at 8,850. The quoted price for Qingdao rubber retreated slightly with general inquiries. The quoted price of RSS3 was $1,390 to $1,400 per ton. The spot price or CIF of STR20 was $1,200 to $1,220 per ton. The CIF of SMR20 in August was $1,205 per ton. The CIF of mixed rubber from Thailand in October was $1,250 per ton.

China News: The China Automobile Dealers Association released the latest issue of the "Automotive Consumption Index" on the 1st, showing that the auto consumption index in May 2020 was 63.0, which was down compared with last month. June is the traditional off-season of the automotive market. Demand that was suppressed during the epidemic was basically released in April and May, and sales in June will decrease slightly. Judging from the sub-indexes that make up the automobile consumption index, the demand sub-index in May was 76.9, a decrease from the previous month. As the domestic epidemic is coming to an end, household demand is gradually released in May, and demand for car purchases will be reduced in June.

In terms of synthetic rubber, Sinopec Corp. lowered the price of butadiene to ¥4,000 per ton, the cost was lowered, and the transaction was acceptable. The China Automobile Association's forecast for auto sales in May is an increase of 3.2% month-on-month and an increase of 11.7% year-on-year. The “Automotive Consumption Index” that fell in June may be a prospective indicator, and the continuity of auto consumption remains to be seen.

Futures Operation Advice: The SHFE rubber fluctuated. As for the main RU09 contract, it is advised to pay attention to the pressure at the recent high level.

(For reference only)