Investigation On The Price Rise Of Upstream Raw Materials: The Total Amount Of Funds In The Futures Market Has Exceeded 820 Billion Yuan, "Having Goods Is The Biggest Advantage"

On the night of November 24, oil prices rose and gold prices fell, and market risk appetite continued to rise, which has become one of the main themes of the global market in the near future.

Lithium, lead and zinc, aluminum, polyester, titanium dioxide, excluding some subdivision of the beverage industry, the sectors with the highest A-share growth since November are all upstream raw materials. Even the most stable "character" LME copper futures in March has risen to $7909.5/t, which is close to breaking the peak in June 2018.

Part of the subdivision industry, it is difficult to find a good situation. East China a titanium dioxide industry trader so described to reporters, "don't ask which product price has advantage, have goods is the biggest advantage."

On the other hand, the capital market's recognition of the rising trend of commodities is also increasing, and the speed of capital entering the market has increased significantly.

According to a group of data disclosed to reporters by the China futures market monitoring center, as of November 12, the total amount of funds in the futures market has exceeded 820 billion yuan, and by the end of 2019, this data is still less than 500 billion yuan.

The upstream raw materials sector has obviously stabilized before the global epidemic "turning point".

"Overseas affected by the epidemic situation, manufacturing stoppages are common, but there is demand. On the contrary, due to the effective control of the epidemic situation in China, the rapid recovery of its own demand and the increase of overseas demand have significantly supported the prices of raw materials upstream. " Said Jing Chuan, chief economist of CUHK futures.

In the first half of the year, the domestic manufacturing industry was suppressed by the epidemic situation, and the prices of raw materials dropped. In the second half of the year, demand was delayed and concentrated, resulting in the mismatch between supply and demand of some commodities, leading to price rise. If the new crown vaccine can be successfully implemented, similar situation may occur in overseas markets in the first half of 2021, which will benefit the upstream raw materials.

"Structural" price rise reappearance

Compared with the trend of major global commodities, it can be seen that there was a strong risk aversion sentiment in July this year, and the gold price hit a record high in early August. From August to October, the risk aversion sentiment weakened and the leading varieties turned to agricultural products with better basic conditions.

However, since November, industrial products have rebounded across the board. Statistics up to November 24, ice, NYMEX crude oil futures prices have both rebounded more than 25%, copper and aluminum prices rose simultaneously.

Together with the rebound, there are also domestic listed industrial futures, involving petrochemical industry chain, coal coke steel industry chain, as well as nonferrous metals and some building materials futures.

Among them, the futures prices of polypropylene and aluminum achieved the largest one month increase since the second half of the year. Even iron ore and rebar, which are not very superior in supply and demand, also rose by 11.32% and 6.13% in the same period.

More directly, the margin scale of domestic futures market increased rapidly in the second half of the year.

According to the data of China Futures Association, the rights and interests of customers in the futures market amounted to 629 billion yuan in April and 800 billion yuan in October this year. Data from the futures market monitoring center showed that the total amount of funds in the futures market had exceeded 820 billion yuan as of November 12.

But before and after 2013, the number was only 200 billion yuan, and now it has increased by nearly 200 billion yuan in half a year.

The Wenhua commodity index, which tracks 47 varieties, has been rising since November. At the beginning of July, the total number of positions held was 20.416 million, and by the afternoon of November 25, it had increased to 24.973 million.

More importantly, in addition to the main futures varieties, other sub sectors benefited from the improvement of terminal demand, and the prices of upstream raw materials also increased significantly, which was even greater than that of futures products.

Take the new energy automobile industry chain as an example, the domestic second half year volume is obvious, and the sales volume of many automobile enterprises increases greatly.

This has ignited some of the raw materials upstream. According to the monitoring data of the business agency, the average price of silicone DMC in China at the end of October was 20400 yuan / ton, which had risen to 31500 yuan / ton by November 24, with an increase of 53.32% during the month.

Together with the rise in the power battery link of lithium battery materials. On November 24 and 25, Xinyu Guoxing lithium Co., Ltd. and Shanghai Chen Li new material Co., Ltd. raised the price of lithium carbonate respectively. After the increase, the price rose to 45000-46000 yuan / ton, while in early September, the mainstream transaction price of battery grade lithium carbonate was concentrated in 39000-41000 yuan / ton.

In this context, lithium iron phosphate cathode material with lithium carbonate as raw material, after four rounds of price reduction within the year, stabilized and rebounded in November, and the industry prosperity increased significantly.

The recent rebound in raw materials is not limited to this, rare earth, carbon black, titanium dioxide and other subdivision products due to the change of their supply and demand relations, the price has increased significantly.

"Pro cycle" is popular

After experiencing the structural bull market in the commodity market in 2016, domestic investors are very familiar with the logic of cyclical stocks. This time is no exception. The pro cyclical industry has become the biggest winner in the A-share market since November.

According to statistics, from November 1 to November 25, the top five rising shenwanbao industries in Shanghai and Shenzhen stock markets were mining (16.95%), nonferrous metals (16.1%), steel (12.24%), automobile (9.55%) and chemical industry (8%), showing a fundamental reversal compared with the market performance in October.

The prosperity driven by the price rise has been improved. The leading listed companies in the industry corresponding to the raw materials with outstanding price performance have recently become the leading varieties in the stock market.

According to the most subdivided sectors of Shenwan, rice wine and other liquor companies have been the top gainers since November, followed by lithium, rare earth, passenger cars, carbon black, other mining, aluminum and polyester, etc.

The lithium industry is the most typical. Tianqi lithium industry (002466. SZ) and Ganfeng lithium industry (002460. SZ), which are called the "two giants of lithium industry" in China, increased by 36.06% and 30.66% respectively from the beginning of the month to the 25th. The total market value of the latter broke through the 100 billion mark for the first time.

The reasons for its rise include the significant recovery of the new energy vehicle market in the second half of the year, the expectation that the demand for power battery will be increased substantially in the future, and the continuous soaring sentiment of Weilai automobile and Xiaopeng automobile in the US stock market.

And nonferrous metals, steel and other industries listed companies share prices in the past two years, "cost performance" has become increasingly prominent.

In November, the rebound in steel prices provided an opportunity for undervalued steel stocks to rise, and resonated with the rise of other cyclical stocks. Fangda special steel saw a wave of nearly 30% rise in that month.

Price return to supply and demand

Whether it is the commodity market or the stock market, the current situation is that prices have rebounded to a certain extent, and the key is how long it can last in the future? This requires a return to their respective fundamentals.

Due to the different driving forces of the rise, some are the periodic rise caused by the short-term mismatch between supply and demand, and the rebound caused by the clearing of upstream capacity and the inflection point of terminal demand.

Therefore, in the future, the trend of the above-mentioned commodities is bound to show obvious differentiation. After the collective rise of the above-mentioned "Pro cyclical" industries, some varieties and individual stocks have also begun to weaken in recent two days.

"As far as the domestic market is concerned, the driving effect of investment on the economy is not obvious, but the consumption side is better than expected." Jingchuan said that on the one hand, the domestic epidemic situation was well controlled, and the terminal demand in the second half of the year increased steadily. On the other hand, due to the shutdown of overseas epidemic factors, part of the demand was transferred to China, forming an increase.

He pointed out that at present, a number of new coronal vaccines have also entered the third phase of clinical stage. If they can be launched early next year and the overseas epidemic situation is under control, governments of various countries may focus on implementing various fiscal and monetary policies in order to restore the economy.

At that time, the suppressed demand in overseas markets will break out intensively, driving the growth of downstream consumption, thus forming a price support for upstream raw materials, such as copper, aluminum, zinc, lead and other industrial metals.

However, due to the different strength of the supply and demand side, the price trend may be different. For example, the upward trend of copper price was driven by the decrease of periodic supply and mine stoppage caused by the epidemic; the driving force of aluminum price was the recovery of automobile consumption and the continuous decline of inventory in the downstream, and its price trend should be more prominent.

In Jingchuan's view, with the recovery of national economy in the future, at least in the first half of 2021, the basic metals will still maintain a high degree of prosperity.

In contrast, although the coal, coke and steel industry chain had a good outlook in November, the industry supply and demand had not reversed significantly, which was more difficult to compare with the super price driving force generated by the supply side structural reform in 2016.

"There are many upward factors in steel price in November, including the improvement of infrastructure, export and manufacturing industry, as well as the decrease of crude steel output in October and the rush period of construction enterprises in November." Lange Iron and Steel Research Center Director Wang Guoqing said.

However, under the background of construction site stoppage and weakening demand in northern China in winter, the rebound caused by the above mismatch of supply and demand is difficult to sustain, and the higher price also faces the problem of downstream acceptance.

Tracing to the level of enterprise management, all steel enterprises are just taking a breath in November on the basis of the "bitter days" in October.

However, some sub sectors, such as lithium and rare earth, may operate independently of the commodity market due to the deterministic growth of terminal demand.

In the past two years, the price of the former has fallen below the cost line, the upstream production capacity has been cleared obviously, and the downstream has been stimulated by the long-term demand for new energy vehicles and power exchange; the latter is affected by the domestic industry norms, and the supply and demand pattern changes caused by the slowdown of upstream supply and the stable demand for new energy and electronics in the downstream, and is expected to form a long-term support for the price.