Recap #
This Friday we saw a dramatic freefall in coking coal futures. If we had followed the plan and shorted JM2701 at 1670 (the opening price on September 7th), we could have made an unrealized profit of around 6.5%.
Observations #
On Coking Coal and Steel Products #
Friday’s freefall was due to the document on coal supply guarantee issued by three departments including NDRC, NEA and NMSA. I would say finally someone is going to do something on the supply side for coal. To be honest, I thought that demand reduction from the downstream would come first. Actually, even though the profitability of steel mills fell below 10%, a near 10-year low, hot steel output this week was still high.
At the moment, I think going long on steel products might be a better trade than going short on coking coal, because of the hostilities in the Middle East and the security checks on coal mines, even with the document issued. Of course, going long on steel products right away is not advisable, as we should wait until there are signs of reduction in hot steel output, stabilization of coking coal prices, and marginal improvement in downstream demand.
On Corn #
What is interesting about corn is that C2611 has reached a lower low, and C2701 has fallen back to the previous low, while soymeal futures are still at a high.
I haven’t followed the corn markets recently, but when prices stabilize, there might be a trading opportunity in corn.
Plan #
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