Currently, attention from all walks of life is focused on the prevention and control of the new coronavirus pneumonia epidemic. When will the epidemic reach a turning point? What is the pace of resumption of work? Which variables will have a greater impact on commodity futures investment? After the turning point of the epidemic arrives, where will the core focus of investment in black, non-ferrous, and energy sectors be?
Tomorrow is the time when construction is about to start in various places. As the saying goes, “the New Year is over after the fifteenth day.” This year, many of us will start our journey in a hurry after the Lantern Festival, just like the ancients.
In order to fight the epidemic, the Spring Festival holiday has been extended this year, which lasts for about half a month. Production activities in steel, building materials, non-ferrous metals, construction, coal and other industries have been postponed due to the epidemic. Afterwards, revenue was greatly affected.
Academician Zhong Nanshan said that the current epidemic control has been effective. Although the recent increase in new cases is a good sign, it does not mean that we have reached an inflection point. Under neutral assumptions, some scholars estimate that the number of new confirmed cases will reach an inflection point in mid-February.
No one can say for sure when the turning point of the epidemic will come. But we can take a look at how various futures sectors will react to its arrival and prepare in advance.
Non-ferrous metal sector
The previous pessimistic expectations of the epidemic on the industry have Most of this is reflected in the price, and future price changes will mainly depend on the development of the epidemic. If the epidemic reaches an inflection point, from the perspective of market sentiment, the probability of a short-term rebound in non-ferrous metal prices is still relatively high. However, after a short period of emotional recovery, the market will still enter the stage of testing expectations, that is, the impact of the epidemic on the short-term economy and the impact of micro-level demand for non-ferrous metals. For most non-ferrous varieties, there is a high probability of exceeding the expected accumulation after the holiday this year. It will happen. The core is the increase in inventory and the inflection point of growth.
Non-ferrous sectors continue to pay attention to the prevention and control of the epidemic
The current epidemic situation It mainly affects the nonferrous industry in terms of sentiment and supply and demand.
Zheng Jingyang, a nonferrous metal analyst at Nanhua Futures, told reporters that in terms of sentiment, the epidemic has impacted China’s economic growth and affected demand expectations for nonferrous metals, leading to pessimistic market sentiment. First of all, the delayed resumption of work by enterprises and construction units is not conducive to the real estate, infrastructure and manufacturing industries downstream of non-ferrous metals. Secondly, the short-term epidemic will suppress residents’ consumption, leading to an expected reduction in downstream demand for non-ferrous metals. In addition, the epidemic will also affect the export of non-ferrous downstream terminal products to a certain extent. In terms of supply, the epidemic has had little impact on the upstream operations of non-ferrous metals, and most companies have maintained normal production. However, downstream companies have generally delayed operations due to the epidemic, so this will inevitably lead to a periodic oversupply in the market, resulting in the accumulation of inventory. As a result, all major non-ferrous products fell sharply on the first trading day after the Spring Festival, with Shanghai Copper once hitting its limit.
As for the resumption of work of industrial enterprises after the holiday, Zheng Jingyang said that in fact, most smelters in the upstream of non-ferrous metals have maintained normal production since the Spring Festival. A few smelters have suspended production due to normal holiday maintenance and are not affected by the epidemic. interference. However, due to the impact of traffic control, the pressure on sulfuric acid warehouse expansion has increased, which may force smelters to reduce production in the future, especially copper smelters with lower processing fees, which are expected to reduce production in the medium to long term. The raw material inventory of electrolytic aluminum companies was relatively tight before, but after purchasing and dispatching, they were able to maintain normal production. Non-ferrous metal downstream enterprises usually start operations after February 10, which is at least 7-10 days later than the original start time. As consumption is postponed, some aluminum companies in Inner Mongolia and Xinjiang have increased the amount of ingots cast, and aluminum ingot inventories in consumption areas may continue to increase in the future. In addition, non-ferrous products such as copper and zinc are also facing relatively large inventory pressure in the short term.
Cao Yang, a senior nonferrous analyst at Orient Securities Futures Derivatives Research Institute, also mentioned that compared to the turning point of the epidemic, the market is actually more concerned about what will happen in the prevention and control of the epidemic. The core of the adjustment is when logistics and trade can return to normal. He mentioned: “The obstruction of logistics and trade caused by the current epidemic prevention and control upgrade has threatened the guarantee of raw materials and auxiliary materials for smelters. At the same time, the processing of sulfuric acid for copper, zinc and other varieties is also in jeopardy. If logistics and trade do not return to normal within a week, we will I am quite worried that there will be an obvious risk of production reduction in supply in the future, which will support the price of non-ferrous metals.”
Look at it in different levels New situations after the epidemic turning point appears in the future
The possible impact of the epidemic turning point in the future can be divided into two levels. Wang Siran, director of the Jinrui Futures Research Institute, said that the first level includes the emergence of effective drugs for this epidemic, the continued decline in the number of confirmed or suspected cases outside Hubei, or the increase in the number of cured cases, etc. By then, the overall non-ferrous metals will have a certain level. of rise. Previously, varieties with better fundamentals, such as copper, would also rise at a larger rate.
The second level of inflection point is when the above-mentioned optimistic situation begins to show continued signals. At this time, the non-ferrous metal sector or the entire macro economy needs to be re-evaluated, and non-ferrous metal prices will make adjustments to the new situation after the first round of rebound. He explained: “For example, the impact of the epidemic is equivalent to pulling a spring. Within a certain degree of tension, the spring can rebound, which will have a smaller impact on the economy. But if the ‘pull’ lasts too long, for many people industries, especially those with high debt ratios�Among the factors that affect the market, the impact of the epidemic is already ranked first.
Second, we must consider inventory. Fan Yu said that the petrochemical inventory on Friday was 1.335 million tons in the early storage, and the late storage is expected to start at 1.35 million tons. Next Monday, the inventory will start at 1.4 million tons. 1.4 million tons is already the high peak of many researchers’ Excel statistical tables in the past 5-6 years, but this is not the peak. It is expected that the peak will be between 1.5 million tons and 1.7 million tons, and “sky-high inventory” is about to appear.
In terms of supply and demand, petrochemicals have gradually begun to reduce their load. The current basic average load is 70%-85%, but it is still a drop in the bucket. Fan Yu said that in addition to the mask factory and protective clothing factory that are now fully operational, most cities across the country basically require that work be resumed on the 10th. However, judging from the current situation, the proportion of people who can resume work on the 10th is not high. In addition, even if employees return to work on February 10, all factories must self-quarantine employees for 14 days. Moreover, the population movement during the Spring Festival travel season in previous years has been from the middle and lower reaches of the Yangtze River and the Pearl River Delta to inland cities. At present, the Yangtze River Delta and the Pearl River Delta are almost all in the first-level prevention and control state. If companies do not do a good job in isolation and start operations rashly, if something happens If there is a cluster of epidemics, you will be subject to financial penalties (administrative penalties). Currently, companies have to choose between paying for 14 days of starting work or delaying starting work. Many companies in South China have taken the initiative to appeal to the government to voluntarily postpone the start of construction to March 1. This may not be an isolated case.
Secondly, we need to consider logistics (cash flow) as well as financial and emotional factors. “At present, the main reason is that the logistics link is not moving, inventory is accumulating, transportation is blocked, inbound and outbound warehouses are blocked, and demand is in a negative cycle.” Fan Yu said that logistics will be one of the key straws that overwhelm the market. He expects that the logistics chain will gradually improve in the near future, and most warehouses will gradually resume operations starting from February 10, and it will take up to two weeks to fully recover. Judging from the market situation, short sellers still dominate at low levels, and PE and PP are generally shrouded in pessimism. From an external perspective, the situation is relatively stable. Oil prices are currently oscillating at the bottom and stabilizing after breaking $50/barrel.
To sum up, it is very unlikely that petrochemical stocks will rise sharply next week, so you don’t need to think about it any more.
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