Bulk Commodities "Selling Tide" Spread: Shanghai Copper Main Body Even Eat Two Limit "Thread Gold" Early Flash Crash 4%

Panic is hanging over the commodities market. After the collapse of the price of energy products led by crude oil, non-ferrous metals, which also possess financial attributes, and black lines with independent pricing in China have joined the collapse queue.

In March 19th, the main contract of Shanghai copper and Shanghai tin Futures Limited to both sides, while the jog steel futures contract, which was dubbed "thread gold" by the industry, dropped 2005 in early trading for more than 4%.

At this point, all major industrial plates, including energy, coloured and black, fell completely, leaving only a relatively strong agricultural product with strong fundamentals.

In this regard, chief economist of Jingda futures, 19, pointed out that the recent decline in crude oil and the prohibition of naked air transactions in some countries led to a liquidity crisis in hedge funds, and thus selling high yield assets, triggering a panic in the market as a whole.

A commodity trader in East China also believes that the turmoil in the global capital market is essentially a settlement of the US dollar liquidity system. "Before the United States released liquidity, it could solve the problem. But this time, no one can foresee the outbreak of the outbreak, including the lack of liquidity in Europe. "

As for the commodity market, after the first selling of crude oil and the loss of precious metals in the risk avoiding function, all parties began to target the colored varieties such as Lun copper and so on.

Selling tide continues to spread

From February 3rd to March 18th, the 2006 main contract of INE crude oil futures contract fell 45.5%, while Shanghai copper futures fell 14.55% and gold futures fell 2.54%.

Rebar 2005 contract rose 1.28%, and the 2012 contract rose 4.3%.

As a result, the rhythm of the global commodity market was abrupt on the night of March 18th. US crude oil futures hit a new low of 20.52 US dollars / barrel, which is close to the two quarter target price given by the international bank. Meanwhile, the representative of nonferrous metals, Lun Tong, has seen an accelerated downward trend, and has fallen by nearly 8% throughout the day.

Since it was an international commodity, after the opening of March 19th, domestic commodities fell all over the world, and the 12 main commodity futures contracts, including copper and tin, fell to a peak.

But how can the industry's supply and demand change so quickly?

The core is still in the transmission effect of the capital market. "Lun copper fell largely from the emotional impact of the macro level." SMM, a senior analyst at the copper industry in March 19th, said that this week, we can see that overseas epidemics are still continuing to ferment. Meanwhile, overseas countries' economic boost policies have been released densely. However, these stimulations have not played a positive role, but have increased the market panic.

According to her introduction, although copper has both commodity and financial attributes, the main factors leading to prices in recent two years are mainly from the macroeconomic level. In the context of global economic growth, copper prices have never been better.

In the short term, the factors leading to the collapse of Lun copper may be related to the decrease in overseas liquidity.

"When the economic situation deteriorates, the ability to obtain cash will weaken, and the market will choose assets that are easy to obtain liquidity, such as gold and copper." Jingchuan said.

The recent decline in the entire overseas commodity market is also the case, starting with the crude oil that OPEC failed to negotiate, and then losing the gold in the phasing out of the hedging property and the falling queue of high value copper.

For the domestic market, apart from the direct impact of energy and coloured plates, the decline of the overall commodity market once again spread to black commodities with independent pricing.

Even jokingly known as "thread gold", as well as hot coil, wire and other steel varieties, in early March 19th, there has been a sharp downward trend.

In fact, during the 2008 financial crisis, colored and black metals also fell due to the financial chain reaction.

But this time, due to the impact of the epidemic on the domestic economy, the market is generally expected to increase investment in infrastructure projects in the second half of the year, making the prices of black commodities unchanged, such as the redevelopment of rebar futures in March 19th.

"If there is a large-scale liquidity crisis around the world, there will be no foundation for supporting the black system." The traders pointed out that the current market can not be compared with 2008, even if the infrastructure growth in the second half of the year will increase, it will only be used to hedge against the impact of the downturn, rather than take it as the main driving force for economic growth.

Therefore, in his view, in the context of the simultaneous fall of risky assets and risk assets, the rise of black lines is not reasonable enough.

Will agricultural products fall or fall?

With the addition of "discount" teams to the colored and black commodities, only the agricultural products have not yet experienced accelerated decline.

In the context of a systemic fall in the overall market, can agricultural products be independent?

"No, systemic decline will also drive down the price of agricultural products. Only because the correlation with the macroeconomic is less than that of industrial products, the decline is less than the latter. At the same time, after the market sentiment has been released, some varieties with basic support will quickly stabilize and rebound. Liu Sikui, an agricultural product analyst at Central Plains futures, said in March 19th.

According to his introduction, the oils and fats in agricultural products had obviously dropped in mid March, but there was a certain rigid consumption in the downstream as a support.

At the same time, the soybean meal with high correlation coefficient with foreign markets was affected by the epidemic, and the number of ports arriving in March decreased, coupled with the resilience of the domestic downstream aquaculture industry, the recent price performance was relatively strong.

"There are other alternatives, such as the close relationship between cotton and foreign trade, and the recent price performance is closely related to other industrial products after the demand side has weakened." Liu Sikui said.

In fact, the differentiation of the internal trend of the above-mentioned agricultural products and the sharp decline of crude oil and other industrial products are also traceable.

After sorting out the systematic decline of the commodity market in the past 12 years, CITIC futures found that the decline of agricultural products was the lowest under every risk event, while the decline of energy, metals and industrial products was almost the same. In addition, the average increase of copper and thread was the largest in every commodity rebound process, and cotton in agricultural products rose the largest.

The logic behind this is that the most rapidly repaired consumption is the optional consumption and durable goods consumption of residents, while the rigid agricultural products such as cereals, Oils and foodstuffs are not subject to much stimulation in the short term.

In other words, even if the future commodity sell-off spreads to the agricultural sector, the price performance will probably be better than that of industrial products, thanks to its own supply and demand and price fluctuations.

However, in the context of the overall shift of the commodity market, the industry has already had some impact.

In the copper industry alone, for example, upstream raw materials are directly linked to copper prices. "The upstream mine cost line is near 42000 yuan, and it has been very close before the two limit." Wei Xue said.

By the end of March 19th, the settlement price of Shanghai copper main contract has dropped to 37980 yuan / ton, and the cost line of mine has been greatly broken down.

For domestic smelting enterprises, although profits mainly depend on processing fees and by-product gains, the decline of copper prices will not bring direct effects and production losses, but with the increase of supply side's expected production, it will also be harmful to the increase of processing fees of domestic smelting enterprises.

As for terminal factories, the drop in copper prices will increase their fear of falling, and the pace of purchase will slow down accordingly.