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Big reversal! Iron ore unexpectedly became the "loss king" crude oil won the "profit king" throne.
Jul 6,2020 14:18CST
translation
The content below was translated by Tencent automatically for reference.

SMM Network News: real competition gold medal mentor Zhang Xiaoliang told Futures Daily reporter that this year's market is more difficult to grasp than in previous years, especially Nenghua and agricultural products plate, these two kinds of varieties often appear out of line inside and outside the market, affecting the judgment of the short-term market. The main reason is that the short-term market unfolds very quickly, and the market opportunities for the whole day are only concentrated in the 30-minute rise and fall of 15 cents on the same day, and fluctuate in a narrow range for the rest of the time, so it is difficult to find the opportunity to do it again if you miss the opportunity.

"through a self-summary and review of the process of the first half of the operation, I think we should do less short-term, try to take large-level homeopathic positions as the main position, and choose more varieties with obvious trends in different sectors to carry out diversified positions. In this way, the anti-risk ability can be significantly improved, and it is not easy to be washed out by short-term adverse trends." Zhang Xiaoliang said.

When referring to the varieties with large rises and losses this year, the reporter found that among the Nenghua varieties this year, crude oil, asphalt and PP fluctuated greatly; apples and eggs in agricultural products fluctuated relatively; and iron ore was still in the limelight among the black varieties.

The reporter looked up the profit and loss situation of the variety and found that during the competition, the market volatility of the energy and chemical plate and iron ore variety was the largest, and the profit and loss fluctuation was also large. By the close of trading last Friday afternoon, crude oil, silver and asphalt were among the top three profitability varieties in the national competition. Among them, the profit of crude oil is 89.6905 million yuan, that of silver is 58.6336 million yuan, and that of asphalt is 48.6029 million yuan. Iron ore, soybean meal and nickel have become the varieties with more losses in the national competition at present.

How did iron ore become the "loss king"?

Since April, the main varieties of black steel have risen 14.20%, hot rolled coil 20.24%, iron ore 33.90%, coking coal 9.01% and coke 17.41%.

"the whole variety of black series has generally risen since April, with iron ore, hot-rolled coil and coke at the top of the increase. Due to the strong pace of resumption of production and work after the epidemic, iron ore demand continued to strengthen. Domestic pig iron production increased by 1.50% from January to May compared with the same period last year. Even though the country was once hit by a severe epidemic, iron ore demand remained positive. At the same time, foreign iron ore shipments were once suppressed, and VALE shipments remained in the doldrums in the first quarter. Superimposed by the outbreak in Brazil in the second quarter, the market continued to worry about iron ore supply, which contributed to a sharp rise in iron ore prices. " Guotai Junan futures iron ore researcher Ma Liang said.

As for hot-rolled coil, due to the accelerated spread of the overseas epidemic in late March, as China's main export variety of steel, hot-rolled coil was once hit by the overseas epidemic, which led to increased market concerns about domestic hot coil exports, and prices plummeted at one time. As domestic steel mills take the initiative to switch production and reduce production, the supply of hot coil has shrunk significantly, which has largely repaired the phased imbalance between supply and demand caused by shrinking overseas demand, and the hot coil has been strengthening since April.

In Ma Liang's view, coke is similar to iron ore, on the one hand, driven by strong domestic demand, blast furnace production keeps coke demand at a high level. At the same time, the coke production capacity in Shandong area has also stimulated the enthusiasm of the contestants to do long.

During the competition, iron ore, which once topped the list of profits, has now become the most lossmaking variety.

Ma Liang believes that due to a unilateral rise in iron ore since May, which has aroused strong market attention, the participants' enthusiasm for participation has increased significantly, and the smooth unilateral rise has made iron ore once the most profitable variety in the real market competition. And as steel profits continue to contract due to weakness in steel growth, suppressing the room for further upward movement of iron ore, the trend of iron ore is extremely tangled and fluctuates greatly within the day since the beginning of June. from the perspective of trading, this kind of no clear direction and accompanied by the huge fluctuation trend of the day, is more prone to large area losses.

Crude oil temporarily won the throne of "profit king".

"since the start of the real game, the largest increase in Nenghua varieties is asphalt, followed by LPG, inner disk crude oil rose in the middle. On the other hand, the crude oil in the outer disk rose a lot, especially Mei Oil. " Zheng Mengqi, a researcher at Zhonghui Futures Research and Development Center, said that in early March, due to the collapse of the OPEC+ production reduction agreement, oil price war began, superimposed overseas epidemic outbreak, crude oil demand dropped sharply, and began to accumulate reserves. The May contract of US crude oil fell to negative value due to insufficient Cushing capacity just before delivery, while crude oil and downstream energetic varieties fell sharply to recent lows in late April. In May, OPEC+ began to implement the largest production reduction agreement in history. Although the production reduction in some countries did not meet the target, it still gave a big boost to the rebalancing of the crude oil market from the supply side. In addition to the production reduction target of 9.7 million b / d in June, the Gulf countries, led by Saudi Arabia, reduced production by an additional 1.2 million b / d in June, and continued to reduce production in July. The sharp contraction in the supply side of the global crude oil market has greatly promoted the prices of crude oil and its energetic products.

In the firm price variety profit and loss statistics, the crude oil futures profit temporarily occupies the first place, the asphalt profit temporarily occupies the third place. It is reported that in late April, after crude oil prices fell deeply again, OPEC+ began to cut production on a large scale, and overseas countries gradually lifted home orders and blockade measures, and there were obvious signs of crude oil bottoming, and the margin of safety of long crude oil was relatively high. Asphalt, as its downstream variety, has a strong correlation with crude oil. after the price of crude oil falls to a low level, the price of asphalt follows the upward trend, superimposing factors such as the scale of domestic special debt reaching a new high, the peak season of asphalt consumption in the second half of the year, and low refinery inventory in the peak season. Asphalt price has a strong driving force, and since the start of the competition at the end of March, asphalt ranks first in the energetic variety, with a strong bottom-reading mood in the market and a good profit on asphalt quality.

Zhong Meiyan, director of energy and chemical industry at Everbright Futures, told Futures Daily that the rebound in the prices of Nenghua varieties since April is mainly due to both macro and industrial drivers: first, under the influence of the overseas epidemic, many countries have pressed the economic pause button, and at the same time, a series of quantitative easing and rescue policies have been introduced, leading the recovery of domestic demand, resulting in favorable conditions for bottoming out. The second is whether the crude oil market is extremely prosperous. On April 13, OPEC+ reached a new production reduction agreement, which greatly repaired the supply and demand pattern of crude oil supply exceeding demand, and the oil price rebounded sharply after the crisis of "negative oil price", which led to the upward shift of the cost center of energy varieties and price reconstruction. Third, the export of epidemic materials has led to the demand and removal of PP, plastics and other varieties, and prices have risen steadily. Domestic policy support after the two sessions of the National people's Congress has led to a substantial increase in energy-efficient varieties such as asphalt with investment attributes.

In the competition, why are we keen on the trading of crude oil futures? In this regard, Zhong Meiyan believes that, first, prices fluctuate greatly. Oil prices hit a new low before April this year. In terms of cloth oil, after rapidly falling below the 2018-2019 oscillation range along the $50 / barrel, and then step by step through the $40 / barrel, $30 / barrel, $20 / barrel round mark, so the market has been "bottoming out" all the way. WTI2005 contract once fell to negative oil prices also attracted a lot of market attention. Second, there is a large expectation gap in the market. From the breakup of the OPEC+ production reduction alliance on March 6th to the re-conclusion of the production reduction agreement by OPEC+ on April 13th, the spot market price war "smoke everywhere", under the huge uncertainty, the fluctuation range of oil price is very attractive. Third, crude oil has become the target of asset allocation. A large number of product funds enter the market, which makes the monthly difference and regional price difference of crude oil have periodic arbitrage opportunities, so there are many roles of market participants and the market liquidity is very rich.

Whether agricultural products can be picked up or not has become a hot variety in the second half.

A contestant, who spoke on condition of anonymity, told Futures Daily that this is his third year of entry into the futures market, but it is his first real competition, in which he operates varieties such as eggs, cotton, palm oil and soybean meal. According to the current situation, the better income is the egg, and the biggest loss is the soybean meal.

After consulting the K chart of the relevant varieties since the start of the game, the reporter found that eggs fell the most, of which the prices of 2005, 2006 and 2007 contract eggs all showed a downward trend to varying degrees, especially the 2006 contract fell by more than 20%.

In the view of Xie Wen, an agricultural product analyst at the Chinese University Futures Research Institute, the decline in eggs is mainly due to the rise in overall protein prices caused by "African classical swine fever" in 2019, which pushed up breeding profits and stimulated farmers to fill in a large number of fences. As a result, the overall stock of laying hens this year is at the highest level in recent years, coupled with the epidemic dragging down consumption, seasonal consumption off-season, and so on. From a spot point of view, spot eggs have remained in the doldrums since the Spring Festival due to epidemic factors. Egg prices fell again after returning to work in March and April, falling off the lowest level in the same period in history, down about 20% from the same period last year. The spot price of eggs rebounded slightly before the Dragon Boat Festival, but the overall height was limited, and the price of eggs began to fall after the Dragon Boat Festival. The egg industry has a strong periodicity. With the increase of knockout chickens, the decline of laying hens stock column, the passing of the Meiyu season and other factors, 2009 contract eggs have shown a certain increase since the beginning of the stock preparation period the week before the Dragon Boat Festival.

From the perspective of the source country structure of China's soybean imports in 2019, Brazil has become the country with the largest number of soybean imports in China, followed by the United States and Argentina. Due to the rise in soybean crushing profits in China and the rise in imports of soybeans from Brazil, the export progress of Brazilian soybeans has become the key to dominating the price of soybean meal in the second quarter. In the second quarter, due to the impact of the epidemic, the smooth arrival of Brazilian soybeans in Hong Kong caused many worries in the market.

In Xie Wen's view, the development of the epidemic has a critical impact on the market, and the market does not have a good grasp of the pace of the development of the epidemic. If the information is not obtained in time, the contestants are prone to losses in the competition. In addition, the progress of trade relations will also have a short-term disturbance to the soybean meal price. for this kind of news, the market rumors and falsification speed is relatively fast, and the pull and suppression of the soybean meal price is obvious. If the conversion of long-short thinking does not keep up with the pace of the market, the probability of loss is higher.

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