Rebar: Improved steel margins, robust daily hot metal production, high blast furnace operating rates and capacity utilization, and the implementation of the fourth round of coke price hikes are providing some support for finished product prices. With market sentiment improving in the short term, steel mills are primarily focused on shipping, but end-use consumption is suboptimal. Among the five major steel products, rebar production saw a significant increase, but inventories decreased by 46,200 tons month-over-month, while apparent demand increased by 104,100 tons. Short-term supply and demand imbalances in the steel market are minimal. The domestic coking coal spot market remains relatively strong, with generally low mine inventories and high costs supporting steel prices. In the short term, steel prices are expected to remain relatively strong.


Hot-Rolled Coil (HCRC): On the industry front, data from China Steel Union shows that HRC production decreased by 36,500 tons last week, with accumulated inventories reaching 22,500 tons, and apparent demand falling by 85,500 tons. While steel mills are reducing supply, inventory is accumulating, increasing pressure on fundamentals. In the short term, the supply-demand imbalance in the steel market is not significant. The domestic coking coal spot market remains relatively strong, and coal mine inventories are generally low. High costs continue to support steel prices. In the short term, steel prices are expected to remain relatively strong. Strategically, a wait-and-see approach is recommended.

Shanghai Aluminum: China and the United States will continue to push for a 90-day extension of the suspended 24% US reciprocal tariffs and Chinese countermeasures as scheduled, leading to a relatively optimistic market outlook for the negotiations. US JOLTS job openings fell short of expectations to 7.437 million in June, indicating a slowdown in hiring. A sharp decline in imports narrowed the US merchandise trade deficit unexpectedly, prompting Wall Street to raise its Q2 GDP forecast. Fundamentally, alumina spot prices saw a slight increase, while the full cost of electrolytic aluminum rebounded slightly to 16,740 yuan/ton, supporting low costs. Domestic electrolytic aluminum ingot inventories continued to accumulate this week, reaching 533,000 tons in major domestic consumption areas, an increase of 23,000 tons from Thursday. Aluminum bar inventories increased by 2,000 tons. This was primarily due to a decline in the aluminum-to-liquid ratio in late July, which led to a rebound in ingot casting. Furthermore, downstream demand for higher prices slowed shipments. The off-season remains strong, with weak spot market buying sentiment and weak premiums and discounts. Aluminum prices are expected to fluctuate and weaken in the short term.

Alumina: Market sentiment improved overnight, with the Alumina 09 contract rebounding sharply. Fundamentally, Guinea's rainy season this year has been heavier than usual, impacting mine production and shipments. However, given the current ample domestic ore reserves, the actual impact is relatively limited. Industry-wide production costs have maintained a significant downward trend, with average industry profits rebounding to around 400 yuan/ton. Supply continues to improve, with operating capacity reaching a new high for the year at 94.95 million tons, with further capacity releases planned. Demand remains stable, with spot inventories continuing to grow and now returning to year-ago levels. The Alumina 08 contract has maintained a substantial premium to spot prices for an extended period, providing opportunities for arbitrage between futures and spot prices. Registered warehouse receipts are expected to increase significantly in August. Currently, prices are fluctuating within a broad range, driven by macroeconomic sentiment.

Aluminum Alloys: Overnight alloy prices fluctuated strongly. Macroeconomic factors included the extension of US-China trade tariffs, a weaker-than-expected US June JOLTS job openings, and a cooling labor market, creating a mixed macroeconomic environment. Fundamentally, primary aluminum prices fluctuated at high levels, with scrap prices for some grades declining slightly, weakening short-term cost support. On the supply and demand side, die-casting performance weakened, while social inventories continued to accumulate, putting downward pressure on both supply and demand. However, with orders from manufacturers impacted by traders, support for prices persisted. The ADC12-A00 spread narrowed slightly, reaching -495 yuan. Jiangxi Baotai's spot price remained flat at 19,600 yuan. Overall, macroeconomic sentiment fluctuated, while spot prices remained acceptable, with alloy prices fluctuating at high levels.

Shanghai Lead: Shanghai lead prices fluctuated strongly overnight. Fundamentally, for scrap batteries, high summer temperatures have limited supply to recyclers, keeping overall external quotes relatively firm. On the supply side, there's little room for near-term fluctuations in operating rates at recycled lead plants, with limited market news on production cuts and resumptions. Furthermore, due to cost pressures, expectations for short-term spot supply increases are muted. On the demand side, the shift to peak season in end-user consumption is not yet evident, and downstream battery companies are maintaining strong purchasing in the short term. Overall, raw material support remains strong, and attention will be paid to whether peak season expectations can be met.

Shanghai Zinc: Overnight, Shanghai zinc prices fluctuated weakly. On the macro level, New York copper prices took a significant hit due to news of Chilean tariff exemptions, adding to uncertainty surrounding the trade agreement reached between the US and China, creating a mixed macroeconomic environment. From a fundamental perspective, on the supply side, regarding raw materials, refineries and mines are negotiating next month's TC near the end of the month, and negotiations are underway to potentially raise prices by 50-100%. According to Baichuan Yingfu statistics, zinc ingot supply continued to increase month-over-month this week. On the demand side, production operations have steadily increased due to off-season demand, but the number of days to receive orders has not increased. Yesterday, the cumulative increase in social inventory increased, and spot premiums rebounded after the futures price retreated. Overall, ingot inventories are expected to continue to accumulate, keeping zinc prices under pressure.

Stock Index Futures: In the previous trading day, the Shanghai Composite Index rose 0.33%, the Shenzhen Component Index rose 0.64%, the ChiNext Index rose 1.86%, the STAR Market 50 Index rose 1.45%, the CSI 300 Index rose 0.39%, the SSE 50 Index rose 0.21%, the CSI 500 Index rose 0.52%, and the CSI 1000 Index rose 0.65%. The trading volume of the two markets totaled 1,803.171 billion yuan, an increase of approximately 60.863 billion yuan from the previous trading day. Among the Shenwan first-level sectors, the best performing sectors were communications (3.29%), steel (2.59%), and pharmaceuticals and biotechnology (2.06%). The worst performing sectors were agriculture, forestry, animal husbandry, and fishery (-1.36%), banks (-1.19%), and beauty care (-0.71%). Regarding basis, the IH basis strengthened, while the IF, IC, and IM basis weakened slightly. The annualized basis rates for IH and IF quarterly contracts are 0.40% and -2.70%, respectively; while those for IC and IM quarterly contracts are -9.30% and -11.70%. For hedging purposes, short positions may consider using quarterly contracts. The Shanghai and Shenzhen stock markets saw a volatile upward trend last trading day, with the Shanghai Composite Index closing above the 3600 mark. Trading volume in both markets rebounded, maintaining recent highs. Yesterday, both markets saw rapid gains in late trading, with the Shenzhen Component Index closing at its highest point. The Shanghai Composite Index fell slightly before the close, influenced by the banking and utilities sectors. At 9:00 PM the previous night, the US and Chinese negotiating teams officially held their second round of talks under the China-US trade framework in Stockholm. There have been no further reports on the progress of these negotiations, and this remains a matter of close attention. Overall, with the macro economy recovering, monetary liquidity easing, and supportive policies continuing to be implemented, the indices are experiencing strong downward support. The accelerated upward movement in both markets yesterday may indicate the end of a phased correction. The profitability of small and medium-sized enterprises is also expected to pick up. The two-way recovery in profitability and valuation may prompt small and medium-sized stocks to perform better than the broader market. It is recommended to maintain long positions in IC and IM.

Stock Index Options: Last trading day, the Shanghai Composite Index rose 0.33%, the Shenzhen Component Index rose 0.64%, the ChiNext Index rose 1.86%, the STAR Market 50 Index rose 1.45%, the CSI 300 Index rose 0.39%, the SSE 50 Index rose 0.21%, the CSI 500 Index rose 0.52%, the CSI 1000 Index rose 0.65%, and the Shenzhen 100 ETF rose 0.78%. Trading volume for the two markets totaled 1,803.171 billion yuan, an increase of approximately 60.8 billion yuan from the previous trading day. Among the Shenwan Securities primary sectors, the best performers were communications (3.29%), steel (2.59%), and pharmaceuticals and biotechnology (2.06%). The worst performers were beauty and care (-0.71%), banks (-1.19%), and agriculture, forestry, animal husbandry, and fishery (-1.36%). After a period of strength, A-shares are experiencing consolidation demand, and the stock index has fluctuated slightly in recent days. The recent strength of the stock index is primarily driven by policy support and loose liquidity. Anti-involutionary policies have improved market sentiment, and the central bank's increased reverse repurchases to stabilize liquidity have significantly boosted market risk appetite. Further positive domestic policy measures and easing liquidity will likely drive the stock index's volatility upward. Strategically, medium-term covered call portfolios are recommended. Regarding volatility, recent upward trends in implied volatility suggest that short-term position management should be emphasized for volatility sellers.

Treasury bond futures: Treasury bond futures fell again on Tuesday. Unilaterally, based on closing prices, the 30-year bond futures contract fell 0.78%, the 10-year bond futures contract fell 0.25%, the 5-year bond futures contract fell 0.17%, and the 2-year bond futures contract fell 0.06%. The yield on the most active 30-year bond rose 3.8 basis points to 1.961%, the yield on the most active 10-year bond futures contract rose 3.25 basis points to 1.7475%, and the yield on the most active 2-year bond futures contract rose 2.75 basis points to 1.445%. Inter-commodity spreads for futures contracts: 4TS-T, 2TF-T, and 3T-TL futures contracts changed by 0.022 yuan, -0.08 yuan, and 0.12 yuan, respectively. Unilateral strategies: Despite the weakening commodity market, bond futures continued to decline significantly, with longer-term bonds showing greater weakness. Expectations of recovering demand and tightening supply haven't been disproven, making it difficult to conclude that rising inflation expectations have ended. Short-term sentiment may fluctuate, but long-term inflationary pressures are limited, and the logic behind the long-term bond bull run remains unchanged. Continue to monitor for dips in TL. Cross-product strategy: Policy disruptions haven't altered investors' preference for long-term bonds, and the potential cooling of RRR and interest rate cut expectations in the short term is unfavorable for short-term bonds. Continue to monitor for arbitrage opportunities in the short-short and long-long markets. Hedging strategy: The basis has recently surged again, refocusing attention on strategies that replace cash bonds with long futures positions.

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