Crude oil

IEA says the demand recovery remains weak

At present, the complexity of the market makes OPEC's production restriction policy face greater challenges. On the one hand, it comes from the uncertainty of demand recovery, on the other hand, it comes from the recovery of Libya's production and the recovery of shale oil production in the United States. Previously, the market expected that OPEC may adjust its policy of production restriction in January next year (increase production by 2 million barrels / day according to the previous plan), but from the perspective of OPEC in the recent. Saudi Arabia and Russia have not shown the willingness to change the original plan, but still emphasize the compliance rate. Therefore, overall, OPEC is more willing to maintain the market share and even expand its market share in the weak demand environment, and even does not exclude the risk of sacrificing part of the oil price decline.

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Strategy: Neutral and bearish relatively, reverse cash and carry arbitrage strategy on Brent, long the sixth lines and short the first line

Risk: supply disruption caused by geopolitical events and sustained sharp depreciation of the US dollar

Iron Ore

On October 14th, 2020, the position on I2101 contract increased by 8,847 and closed at ¥790.5 per ton, the position on I2105 contract decreased by 407 and closed at ¥731.5 per ton.

【Important Information】

1. According to the media reports, on October 13th, Black Iron (Canada) mining company made some progress on the project of Shymanivske which locates in central Ukraine, the company signed an agreement with a construction company and obtained an investment of 60 million US dollars.

Black Iron said it was currently reviewing companies involved in the second round of investment. The company also said it expects to build the plant, the tailings dam mine and the area of hillock which is currently owned by the government of Ukrainian.The Ministry of Ukrainian defense is training in the area. The completion of the project requires negotiation with the government. The resources of Shymanivske project are estimated to be 646 million tons, with iron ore accounting for 31.6% and magnetite accounting for 18.8%, among the other 188 million tons of measurable resources, iron ore with 68% iron grade is about 57 (30.1%) million tons.

2. According to the media reports, the Federation of Indian mining industry (FIMI) said that the inventory of mines is increasing year by year. In a letter from FIMI to Piyush Goyal who is the Minister of industry and commerce, FIMI said that at present, India needs about 165 million tons of iron ore and 206 million tons of raw materials for steel production. FIMI also said it would impose export tariffs on 58% of iron ore.

3. In terms of spot, the PB powder in Rizhao Port was ¥880 per ton, golden bubba powder price was equivalent to ¥963 per ton,

【Trading Strategy】

1. The total freight volume of Australia and Brazil is still at a high level, and there is a large decreasing number in crude iron on the year-on-year base, and the pressure on the supply side still exists. In terms of demand, recently, the government of Tangshan successively issued the production restriction documents in October to suppress the rising volume of hot metal; meanwhile, with the advent of autumn and winter, the blast furnace operating rate is expected to decline, and the iron ore demand is expected to be weak. Overall, the spot inventory of iron ore will face the situation of oversupply in the later stage. There will be a greater pressure on the reduction of spot price in the later stage. However, the range of discount is relatively large, it is expected to be volatility. It is suggested to buy 01 coking coal and short on 01 iron ore

2. Option strategy: It is advised to hold the short position on i2101-C-870. (For reference only)

PTA

PTA: The sale of Polyester production remained at a good level, the basis of PTA is increasing.

in October, if all the overhauls are fulfilled, the inventory will continue to decrease, and it is advised to focus on the overhauls development. There is an expectation of rigid accumulation in November and December.

In terms of the unilateral strategy, it is advised to be neutral; for the strategy across varieties, the high inventory problem has not been resolved yet, and it is not advised to maintain the strategy across varieties, but the willingness of the upstream factory to maintain and control should still be judged based on the change in processing fees; for strategy across period, it is advised to focus on the reverse cash and carry strategy opportunity after the next round of TA overhauls fulfilling and rebound of 1-5 spread. It is advised to focus on PTA factory inspection and fulfillment wishes, and the downstream restocking space and improvement of demand.

Natural Rubber

RU: October 14th, 2020, the main force contract of RU01 up by 90 or 0.67% and closed at 13,450. The main force contract of JRU03 rose by 1.9 or 0.95% and closed at 202.1. Yunnan WF closed at 12,550 to 12,650 yuan per ton, Hainan SCRWF closed at 12,650 to 12,700 per ton, the secondary standard rubber closed at 11,150 to 11,200 per ton, and Thailand’s RSS3 closed at 16,550 yuan per ton.

NR: The main force contract of NR12 up by 90 or 0.88% and closed at 10,275. The main force contract of TF12 rose by 2.5 or 1.69% closed at 150.0. Qingdao rubber in USD up by $10 to $15 per ton. The spot or CIF of STR20 was $1,550 to $1,560 per ton. The CIF of SIR20 in October was $1,485 to $1,490 per ton. The CIF of mixed rubber from Thailand in January was $1,525 per ton to $1,530 per ton

Media news: on September 30th, China Automobile Circulation Association released the latest "inventory warning index survey of China's automobile dealers", VIA (vehicle inventory alert) Index shows that in September 2020, the inventory warning index of auto dealers was 54.0%, up by 1.2 percentage points compared with the previous month, and decreased by 4.6 percentage points compared with the same period last year. The inventory warning index is above the prosperity threshold.

Futures Operation Advice:

The volume of rainfall in Thailand has increased recently. Rainstorms have been observed in the main producing areas such as Jiami, Dongli and Botaron. The average daily volume of rainfall in October reached 12.49mm, and the cumulative volume of rainfall in 90 days increased by + 40.2% on year on year base. According to incomplete statistics, more than 30 steel brands have issued price adjustment letters since August due to the similar cost structure, the rising in the market of semi steel is likely to follow. The main RU01 contract should be wait-and-see and pay attention to the recent high pressure. (For reference only).