SHANGHAI, Oct 8 (SMM) -
Macro front: international
OPEC did not increase the overall production, international oil prices have risen sharply
The OPEC+ representative stated that the OPEC+ Joint Ministerial Supervisory Committee recommended that OPEC continue to increase production as originally planned, that is, to increase the production by 400,000 barrels per day. Previously, the market estimated that the scale of OPEC+ production increase may exceed twice the previous estimate, which is 800,000 barrels per day. As such, international oil prices rose sharply during intraday trading. Among them, the WTI futures prices once exceeded $80/barrel, and rose by more than 3% during the intraday session, refreshing the highest level in the past seven years. Brent futures climbed to over $82/barrel, continuing to hit a new high since October 2018, with an intraday increase of more than 3%. Since the beginning of the year, WTI and Brent futures have both gained close to 60%.
Intensified labour shortages in some European and American countries
[Oil shortage continues in the UK, 150,000 pigs to be destroyed due to lack of butchers]
Brexit and the COVID-19 pandemic have caused a shortage of employees in the world's fifth largest economy, and the transportation of fuel, medicine, and food has been greatly disrupted. The oil shortage caused by the severe shortage of truck drivers in the UK has not been alleviated. As of October 1, many oil stations were still out of oil. On the other hand, due to the shortage of butchers and slaughterhouse employees, they may be forced to shoot or burn the live pigs that cannot be slaughtered but need to be fed. Within a week or 10 days, as many as 150,000 pigs in the UK may be destroyed.
[US job vacancies reaches 10.9 million, hitting a new high]
The US Department of Labour released a report saying that there were 10.9 million job vacancies in the US in July, setting a record high for the fifth consecutive month, demonstrating further imbalances in the US labour market.
Macro front: domestic
[The China Banking and Insurance Regulatory Commission further emphasized the Notice on Matters Concerning Serving the Normal Production of the Coal and Electricity Industry and Orderly Circulation of the Commodity Market to Ensure the Stable Operation of the Economy]
Recently, in order to maintain the order of the thermal coal industry and the commodity market, and ensure the high-quality economic and social development, the China Banking and Insurance Regulatory Commission issued the Notice on Matters Concerning Serving the Normal Production of the Coal and Electricity Industry and Orderly Circulation of the Commodity Market to Ensure the Stable Operation of the Economy. The notice proposes to strictly prevent bancassurance funds from affecting the normal order of the commodity market. The notice also points out that it is important to ensure the reasonable financing needs of thermal coal, coal, iron and steel, non-ferrous metals and other production enterprises.
[China Southern Power Grid has increased its load capacity during the National Day holiday]
China Southern Power Grid Corporation stated on October 6 that during the National Day holiday, the load and power consumption of the entire grid increased significantly year-on-year. China Southern Power Grid Corporation has taken various measures to ensure the power supply. Due to the rapid domestic economic recovery, the electricity load and electricity consumption of the five provinces in south China have increased rapidly since the beginning of this year. During the National Day holiday, China Southern Power Grid’s load and electricity consumption have both increased significantly year-on-year. From October 1 to 5, the entire network was dispatched and received 17.779 billion kWh, an increase of 21.33% year-on-year. The maximum load reached 178 million kilowatts, a year-on-year increase of 13.26% on October 5. Among them, the maximum load of Guangdong Power Grid was adjusted to 111 million kilowatts, a year-on-year increase of 20.47%.
[State Grid Heilongjiang Electric Power: to coordinate with Russia to increase power supply]
The State Grid stated on its official website that the 500 kV A-Hei line connecting Russia's Amur Oblast and China's Heihe is the country's cross-border transmission line with the highest voltage. In order to ensure local electricity supply, the State Grid Heilongjiang Electric Power will coordinate with Russia to increase electricity supply.
[Serious thermal coal shortage in India]
According to data from the Central Electricity Authority (CEA) of India, 16 of the 135 coal-fired power plants in India had zero coal stocks as of September 29. More than 80% of the power plants have less than one week of inventory, while more than half of the power plants have less than three days of inventory. As of September 29, India's coal-fired power plants had an average of only 4 days of inventory. India imports about 300 million to 400 million mt of coal each year, mainly from Indonesia, Australia and South Africa.
[Heavy rainfall in Shanxi broke the record in early October]
During the National Day holiday, Shanxi was hit by heavy rainfall, and most areas set a record of cumulative rainfall in early October. Part of the local road and railway transportation has been blocked.
[The COVID-19 pandemic in Fujian, Heilongjiang has been effectively brought under control]
Tourist attractions and public places will be opened in an orderly manner; while offline teaching, production and operation, and daily medical services will also be restored in an orderly manner.
Industry focus
[More than 20 coal mines in Shanxi are closed, the post-holiday supply is likely to be tightened further]
During the National Day, more than 20 coal mines in Shanxi will be closed due to flood control, which may tighten the supply further after the holiday. In terms of imported Mongolian coal, it is still difficult to increase the imports of Mongolian coal in the near term, supporting the high-priced coking coal. In short, the mainstream high-quality coking coal is relatively resilient, and the prices are unlikely to fall significantly. The follow-up focus will be on the progress of the reduction of crude steel; the extent to which it affects the demand for coke and coking coal; and whether the thermal coal supply policy can increase the market supply.
[The first batch of coal from Kazakhstan arrived in Zhejiang]
On October 4, at the Liuheng Coal Transit Terminal in Zhoushan, Zhejiang Province, the coal unloader was unloading 136,000 mt of high-quality coal with high-calorific value (6,000 kcal) imported from Kazakhstan. This is the first time that Zhejiang Province has purchased coal from Kazakhstan.
[China allows a small amount of Australian coal to be unloaded]
Nick Ristic, chief dry cargo analyst of Braemar ACM Shipbroking, said that several Australian cargo ships waiting outside the Chinese port finally called at the port last month. It is estimated that about 450,000 mt of coal have been unloaded. Energy research company Kpler also said that five Australian cargo ships have also completed the unloading of 380,000 mt of coal. [Daqin Railway, the main artery of coal transportation, commences intensive maintenance in autumn] China's main artery of coal transportation, Daqin Railway, began the intensive maintenance in autumn to prepare for the coal transportation in winter. In addition, in order to ensure the stability of energy transportation, China Railway Taiyuan Bureau Group will aim at a daily transportation volume of 1 million mt during the maintenance.
The real estate sector is sluggish in the traditional seasonal high in September and October
[The YTD real estate company bond default amount has reached 46.75 billion yuan, an increase of 159% year-on-year]
According to Cric Research, many real estate developers such as China Fortune Land Development, Blu-ray Development, Sunshine 100 China, Tahoe Group, Fantasia Holdings, Sinic Holding Group, China Evergrande, etc. have experienced liquidity tensions in 2021. As of September 27, the cumulative number of defaulted bonds of real estate companies in 2021 reached 39, an increase of 25 over 2020, with a cumulative amount of 46.75 billion yuan, an increase of 159% over 2020.
[September second-hand housing transactions in Shenzhen plummeted by 80%, and fell below 2,000 units for the first time in 12 years]
The latest data showed that in September, Shenzhen sold 1,765 units of second-hand residential properties, a sharp drop of nearly 80% year-on-year. The number continued to fall for 6 months.
[Signs of relaxation of mortgage interest rates in many places]
In some regions, bank mortgage interest rates are showing signs of lowering, and the speed of lending has also increased. According to the survey and statistics of the Wuyou Housing Platform, some large state-owned banks and joint-stock banks in Guangzhou, Foshan and other places have already lowered their mortgage interest rates.
Spot market
During the National Day holiday, the prices of raw materials were mainly stable, while the prices of finished products rose sharply. More downstream enterprises suspended production, and transactions were relatively subdued. The overall sentiment was optimistic.
The power rationing against steel mills in Jiangsu have slightly relaxed, thus the operating rates of some companies have rebounded, but overall production stayed low. Specifically speaking, some steel mills in Jiangsu resumed their production to about half of the capacity, and those in Fujian also partly resumed during the holiday. Most steel mills in other regions maintained the previous state of reduction or suspension of production.
On the whole, the news front during the holiday is active, but the impact on the steel prices is limited. The sudden heavy rain in north China has further aggravated the tight supply of coal as raw materials, and there is still a chance for coal prices to rise after the holiday, which will support the prices of steel to a certain extent. In terms of spot transactions, the transaction was weak, but the market was bullish, and traders' quotations continued to rise.
The operating rates of downstream steel enterprises during the National Day have been extremely low, and it is expected that the resumption of production after the holiday will bring great restocking demand. According to SMM, the supply of building materials in cities such as Wuhan, Guiyang, Guangzhou, and Changsha before the holiday has been insufficient in terms of specific specifications. The output of steel did not see great increase during the holiday. Therefore, the outbreak of terminal demand after the holiday may further tighten the supply, pushing up the prices of building materials.
In terms of HRC, the supply of low-alloy varieties in some cities is slightly tight before the holiday according to SMM survey, but the overall supply has been abundant. During the holidays, the inventory in some mainstream cities is basically stable during the holiday. It is expected that the prices of HRC will follow the general trend.
