I thought 2020, under the influence of the new crown epidemic, commodities should be a bear market, I did not expect, 2020 commodities out of a wave of roaring super bull market!
What is the reason?
The most important thing about commodities is supply and demand.
The simplest theory of political economy that we learned in elementary school can be explained: when supply is greater than demand, commodities fall, when supply is less than demand, commodities rise.
To explain in detail the super bull market in commodities in 2020, we must first have a basic concept: the 2020 New Crown Epidemic, although China quickly controlled, but the epidemic abroad is much more serious than we thought.
Serious to what extent? The head of state of the United States, Britain and France have got the new crown epidemic, not to mention the ordinary people, the world has now accumulated more than 74 million people infected, death 1.65 million people, and now also to the number of new infected 750,000 people every day in the increase, every day the world to 13,000 new deaths, which is still the official can be counted to the number of the edge of the countryside, the number of infected deaths in the war-torn areas have been ignored.
While the Chinese are well protected by the Chinese government and heroic medical workers, people in other countries and regions are not so lucky. With 1.3 million confirmed cases in Germany and 2.4 million in France, the healthcare system is on the verge of collapse, and that's in traditionally developed countries, but the situation is even more dire in developing countries.
When the vaccine was not widely available, quarantine was the best tool, and many workers in mines and farms went into quarantine, so the outbreak had a huge impact on the supply side of commodities, and the lack of manpower and the inability to maintain the supply of commodities was severely limited.
And the demand side, although also affected by the epidemic, but the impact is not so great, first of all, although people in the home quarantine does not go out, but the consumption of food is not reduced a lot, understandably, a day or three meals well, just go out to eat into the home to solve. Secondly, because of the major impact of the epidemic on the economy, various countries have launched a large number of economic stimulus programs, large amounts of money, on a variety of infrastructure projects, so the demand side, although affected, but by the impact is far from the supply side of the big.
Especially in China, as China took the lead in controlling the epidemic, and worked feverishly to produce for the world, as the world's largest manufacturing plant, exporting all kinds of goods to the world, in November, China's trade surplus reached 74.8 billion U.S. dollars in one month, a historical record. Now the cost of shipping goods from China to overseas has risen two to three times compared to previous years, and even containerized containers are hard to come by at ports because they are being sent overseas.
In contrast to its huge exports, China imports a huge amount of basic commodities, and this year it has imported a record amount of metals, oil, iron ore, crude oil, and soybeans.
In the first 11 months of 2020 alone:
China imported 1.073 billion tons of iron ore, up 10.9% year-on-year,
China imported 504 million tons of crude oil, up 9.5% year-on-year,
China imported 92.8 million tons of soybeans, and with soybeans in shipment in December, for the whole year, China is going to import 100 million tons of soybeans, up 17%,
China imported 90.43 million tons of natural gas, up 3.9% year-on-year,
China imported 6.17 million tons of copper, up 38.7% year-on-year,
China only imported coal, which was 10% less than last year, with 265 million tons of coal imported, and then tragically found out that it didn't have enough electricity because of too many orders from companies and factories ramping up production. Because many provinces in winter or by burning coal with thermal power, lack of coal, lack of electricity, such as Hunan, Zhejiang and other places began to pull the power limit, building lights all off, air conditioning temperature can not exceed 20 degrees. Because of the scarcity of coal, the end of the coal also rose on the sky, power coal more than 750 yuan / ton, the long agreement coal prices only 640 yuan / ton, not to mention coking coal coke, these high-end coal, all over the history of the highest value.
The global commodities market, the supply side of the big impact, and the demand side of the impact is small, or no impact, or even improved, the global commodities opened a piece of the sound.
Still to revisit the middle school political economy, if the supply and demand imbalance, the supply is less than the demand, the price of commodities have such a specific impact?
Take food, this year, the global food production is reduced, said earlier that the epidemic affects the farm manpower, but also includes localized bad weather, such as the U.S. soybean borrowed drought hype wave. Food this kind of extremely just need commodities, if the world's food shortage of 10%, food prices will only rise 10%? No, 10% shortage will cause more than 50% rise, if there is a 20% shortage of food, it will make the food up to the sky, for this kind of food this kind of special just need commodities, a slight shortage will make the food double the rise.
However, for China, food is mainly the key staple food pressure is not big, because this year China's grain is still abundant (thanks to agricultural workers and farmers), 2020 China's grain sown area of 1.752 billion mu, total grain output of 1.339 billion jin, close to 670 million tons of China's staple grains of wheat, corn, rice to achieve the five consecutive years of production increases. In the most critical staple food security, China is doing very well, our staple food self-sufficiency rate of more than 95%, and increase the strategic grain reserves, now China's land reserves of more than 600 million tons of grain, that is, even if China does not produce food a year, the reserve is enough for all the Chinese people to eat a year. And, really, if the food shortage rises, you can save the grain fed to livestock, eat less meat, more vegetarian, can save a lot of food.
China is well aware of the importance of staple food, staple food can no longer just need just need, 1.4 billion people's food problems, can not allow half a bit of fluke.
The problem of staple food is solved, other cash crops and oil crops, China will need to import a lot.
Especially soybeans. Soybean can be said to be an important crop in addition to the staple food. Soybeans can be eaten directly or used to make tofu and various soy products. Soybean compared to other agricultural products, there are several key advantages: 1. Soybeans are rich in plant proteins, other crops such as wheat, corn, rice mainly contains starch, soybean plant protein content is still very high, protein content of 75% to 85%. And soybean protein is not only more, but also good quality, soy protein amino acid composition and animal protein is similar, amino acid close to the ratio of human needs, so it is easy to be digested and absorbed. So, if it is a vegan, it will definitely be by eating a lot of soy products to supplement the protein.
In addition to protein, soybeans are rich in fats and oils, and the 5-liter vat of soybean oil we buy inside the supermarket is refined from soybeans. So soybean is a very good agricultural products, not only contains 75% to 85% of protein, but also contains 15% of soybean oil, the whole body is treasure.
In industry, we use 40 degrees to 60 degrees of low-temperature leaching method to extract fats and oils from soybeans, made into soybean oil for people to cook and eat, and the rest of the 75% protein-rich soybean residue, we call soybean meal, is also useful as feed for livestock, soybean meal is a high-quality source of high-quality protein for the baby pigs, baby cows, baby goats, but also soybean meal / vegetable meal (vegetable meal is rapeseed, which is a kind of rapeseed). （Soybean meal is a good source of high-quality protein for baby pigs, cows and goats. Critters don't just eat veggies, they also need to be supplemented with protein to grow well and fast.
China's own soybean production in 2019 was 18 million tons, but the demand for edible oil and feed soybean meal is so great that we also import a large amount of soybeans from the United States and Brazil, the world's leading producers of soybeans, every year, and imports are increasing every year. Because the Chinese people's demand for meat is increasing, we need more soybean meal to feed chickens, ducks, cows, sheep and pigs.
In 2018 we imported 88 million tons of soybeans,
in 2019 we imported 88.5 million tons of soybeans,
and in 2020 we will import a record of more than 100 million tons of soybeans.
Of the soybeans we imported in 2019, 19% came from the U.S., 65.2% came from Brazil, and we also imported soybeans from Argentina, Russia, Ukraine, and other countries around the world. In order to ensure the supply of soybeans, in recent years, China is also making a lot of efforts to restore and expand the soybean planting base in the Northeast, and contract a large amount of land in Russia and Ukraine to plant soybeans. There is no way, China's demand is too large, the global soybean production in 2019 is 360 million tons, and China's consumption accounts for a quarter.
China's imports are so large that a slight breeze on the supply side can easily cause huge price fluctuations.
This year's soybeans because of the new crown epidemic, resulting in the United States and Brazil farm manpower reduction, coupled with the speculation of weather drought, U.S. soybeans have risen to the highest level in 5 years, the cost of soybean imports more than 3,800 yuan / ton, the cost of soybean imports in 2019 is only 2,700 yuan / ton. Soybeans rose 40%.
This year, palm oil, because of the new crown epidemic caused by the main producing countries: Malaysia and Indonesia farm manpower reduction, palm oil lack of fertilization and de-worming maintenance, palm tree production cuts, palm oil has risen to an 8-year high, palm oil in 2019 is only 4,500 yuan / ton, and now 7,000 yuan / ton, a rise of 55%, and is still rising.
Copper and aluminum, which have also soared this year because of the reduction in mine manpower due to the New Crown epidemic and increased demand on the demand side.
Copper is very useful, due to good electrical conductivity, can be widely used in the power and electronics industry, do wire, do computer integrated circuit, do cable and so on.
Aluminum is used everywhere everywhere. Aluminum density is small and light, although very soft, but can be made into a variety of aluminum alloys, both lightweight and strong, in the aircraft, automobile, shipbuilding industry has a wide range of uses. Aluminum is a good conductor of heat, in industry can be used as a variety of heat exchangers, heat dissipation materials and cooking utensils, etc. Aluminum also has good ductility, widely used in a variety of cans, candy packaging supplies. Aluminum surface has a dense oxide protective film, is not susceptible to corrosion, but also used to manufacture chemical reactors, medical equipment and oil, gas pipelines and so on.
And the new energy industry is now emerging demand for copper and aluminum is three times the traditional industry. Copper rose to a 7-year high, close to 60,000 yuan / ton, only 45,000 yuan / ton in 2019, copper rose 33%. Aluminum rose to a 3-year high of $16,500/tonne, only $11,500/tonne in 2019, a 43% rise. And global inventories of both copper and aluminum are currently in decline, and eyeballing may continue to rise later.
Finally, the most used metal in industry: iron. Iron comes from iron ore, which has been one of the biggest commodities this year. Iron is to support the skeleton of modern society, it can be said that there is no modern civilization without iron, the world's annual consumption of metal, iron accounted for 95%. China in the bombardment of infrastructure, building roads and bridges, building cars, high speed rail, building houses, but China's high-grade iron ore is pathetic, the vast majority of iron ore needs to be imported.
Because of the new crown epidemic caused by the main producers of high-grade iron ore: Australia and Brazil mine manpower shortage to reduce production. With the prospect of economic recovery, iron ore consumption increased, so iron ore started a crazy journey.
Iron ore spot has broken through 1100 yuan / ton, close to 160 U.S. dollars / ton, Australia's iron ore cost of 25 U.S. dollars / ton, force and Rio Tinto is expected to sell an average of 50 U.S. dollars / ton of iron ore this year, is now sold to 160 U.S. dollars / ton, iron ore this year, up more than three times, and iron ore prices are still rising every day, the history of the iron ore most crazy when also But just $200 / ton.
For a year to import 1 billion tons of iron ore for China, the situation is quite passive, each ton of iron ore to spend more than 100 U.S. dollars / ton, a year to spend more than $ 100 billion! Just the global origin of high-grade iron ore, more centralized and monopolized than crude oil. The world's crude oil producing countries, there are Saudi Arabia, Russia, the United States, Libya, Iran. But the iron ore producing countries are mainly Australia and Brazil. China's 2019 imports of 1 billion tons of iron ore, Australia accounted for 66%, Brazil accounted for 30%. Iron ore skyrocketed, China is going to spend a lot more money, especially very much to make money on China's extremely unfriendly Australia is very upset ah.... NDRC has affirmed several times the risk of iron ore, looking forward to the early price of iron ore down.
My best investments this year are buying BYD, palm oil and iron ore. Iron ore in making a big wave has closed the position. Don't want to fuel the iron ore madness any more although it is expected to continue to rise later. We can make good money here, in the final analysis are dependent on the country's fortunes, to be determined to stand with the country. Although, now every day watching iron ore crazy, or heartache. But we have to be a person of faith, not all the money to earn. The way I can think of to bring down iron ore is to negotiate with Australia's imports of beef, timber, coal, lobster and red wine, and make sure to bring down the price of iron ore. For more information on China's imported iron ore and the current state of the steel industry, I recommend reading my previous article: "The State of China's Steel Industry".
Finally, about iron ore, because this piece of land in China just does not produce high-grade iron ore and crude oil, the opening map is hard mode, we can not do anything, you can wait for the future after the price of iron ore fell, buy more iron ore as a strategic reserve. Iron ore storage than crude oil is much more convenient, crude oil storage is very troublesome, you need to use special crude oil storage tanks to store, even so will face the problem of volatilization and deterioration, crude oil storage this matter said more are tears. Iron ore storage is much simpler, this is the stone, not volatile and not deteriorate, with the ship back, but also the beach casually dig a big pit and buried is, when you want to use and then dig out. This thing also have to take their time, China's demand is too large, buy more, the price of iron ore is easy to heaven.
Then if you want to do commodity investment, what is the most important thing? After the previous paragraph, we can clearly get a conclusion, do commodity investment, the most important is the supply and demand, to choose the most obvious varieties of supply and demand trends, in the supply is greater than the demand for decisive short, in the supply is less than the demand for decisive do more.
Supply and demand - "trend is our good friend!
Once the supply and demand began to change, the formation of the trend is not going to change in the short term, this time can be along the direction of the trend of happy investment.
For example, palm oil is the most produced and consumed vegetable oil in the world, and it is the oil pressed from the fruits of the palm tree. Palm oil has a wide range of applications in the food industry, the main producing countries are Indonesia and Malaysia. China imports at least 6 million tons of palm oil annually.
The palm trees that produce palm oil grow very slowly, and it takes 6 years from planting to start producing oil, and as long as the palm trees are mature, they can produce oil continuously for 30 years. Therefore, if there is a shortage of palm oil and prices skyrocket, it is too late to start planting palm trees, and it will take at least 6 years before additional palm oil comes out. Similarly, if palm oil plummets because there are too many palm trees, because of the huge cost of raising large palm trees for 6 long years ahead, farmers will not cut down the trees easily, and as long as the price of palm oil covers the cost of processing, palm oil will continue to be produced. Therefore, historically, the price of palm oil fluctuates greatly, the highest time reached 10000 yuan / ton, the lowest time 4000 yuan / ton.
As long as you grasp the trend of palm oil, now it is an upward trend, or a downward trend, you should follow the trend to do more or short.
This is just a general direction, each commodity has specific details, such as palm oil production in November each year to start the off-season, but also the off-season demand, because palm oil in the winter is very easy to solidify, not sold, in the winter is the decline in demand, or the decline in oil production, carefully go to the details of the comparison inside to know the current upward trend or downward trend.
This winter, palm oil is again new highs, because obviously supply falls more than demand falls. India has cut import tariffs in order to import palm oil. India is importing more than 7 million tons of palm oil per year, more than China, because palm oil is the cheapest of all vegetable fats and oils, compared to soybean oil, vegetable oil, vegetable oil, the cheapest vegetable fats and oils, very popular in India.
Last time and a friend asked me, do investment in the end what is the most important? The answer is: stay passionate and sensitive to the world, the world is changing every day, to feel the changes in the world, and then find the trend of change, and then resolutely committed.
Then he asked, can you be more specific, how to find the trend change?
The answer is the amount of information, I know the bull, the amount of information at least 10 times the average person. Every day, in addition to completing their work, spend at least 3 hours of time to read through the domestic and international events, industry news, commodity information, and so on, and then stick to it, read a half a year, will find that a lot of things will be more and more detailed understanding of the changes that will occur, but also be able to make some judgments on the future trend, and then according to the actual situation of the correction of their own logic, and then almost begin. .... Doing investment is actually a chore, to really love the world in order to stick with it.