Many people analyze the relationship between supply and demand of commodities and like to start with the balance sheet. Of course, the balance sheet is the most basic supply and demand fundamentals of commodities, which is very, very important. But many people can't understand that the balance sheet is dynamic. I'm definitely not saying that the balance sheet is useless. The balance sheet is very useful, but it is only an analytical tool, which will change with the change of industrial structure. We often see some goods, which were originally in great supply and high inventory, but the inventory disappeared collectively after the spot did not rise for a few days at first. These things won't tell you on the balance sheet. I like to start with the structure of the industrial chain.

Suppose there is such an industry a, industry. There are basically more than 10 suppliers in China. The import cost is high, domestic factories gradually crowd out overseas markets, and China manufacturing enjoys a good reputation. This industry has upstream and downstream. The current situation is that the upstream is mainly imported raw materials, and the downstream is the huge and complicated B industry, which has hundreds of companies.

Traditionally, we usually think that the upstream of industry A is actually the leading industry in this chain. In China, industry A is obviously stronger than industry B; But industry B is the core of the whole chain, because once the demand of industry B fails, it is useless for industry A and the upstream to be strong.

The strength here is mainly reflected in the industry concentration.

Suppose several leading companies in industry A jointly limit production and insure prices. Where is our analysis angle at this time?

Some people want or don't want to directly deny that this is death.

Because of the high concentration of industry A, many times the whole industry wants to jointly limit production and protect prices, but it has not been successful so far. Especially the last time in 2009, the price of joint insurance finally broke out, which led to a sharp drop in the price of products in industry A, and the lessons from the past were vivid. If you still do this now, instead of giving money, what is it?

But wait. There are several issues to consider:

1. What is the profit and loss of the whole industry? —— Long-term loss, and the loss per ton exceeds that of 300 yuan when the production is limited and the price is insured;

2. What's the relationship now? -futures are heavily discounted;

3. When the price was insured for the last time, what was the relationship between the period and cash? -Futures premium;

4. What was the reason for the failure of last insurance? -spot is cheap, futures pig teammates sell futures, and even buy spot to sell futures;

5. How to insure the price this time? Reduce the operating rate, maintain a low operating rate, and the futures market cannot maintain its value (substantial discount);

There are still many questions, all details.

There is also an ultimate question here: what is the purpose of insuring the price?

Further research on the industrial chain shows that several promoters of the original industry A, whose major shareholders limit production and protect prices, are actually large enterprises in industry B ... This belongs to the price difference from the terminal to the upstream, and the upstream limits production and protects prices. If several leading enterprises in industry A have no products left after meeting their shareholders, is there any hope for this guaranteed reserve price? What will happen to the ecology of industry B?

A starts to limit production and protect prices, and B will not accept it at first, but after the operating rate comes down, A only needs to meet the production needs of its own shareholders, so besides the agreed price, the spot price will inevitably go up, leading to the elimination of small enterprises in B industry. Yes, this is a reshuffle of the industrial chain. This is not an ecological change at all, but a qualitative change of the whole industrial chain. A has changed from a cracking industry to a strong industry, which is why most enterprises in B accepted the reality after doubling the processing fee at the agreed price. Accepting the reality means that you can survive. If you don't accept the reality, you will be out of stock immediately.

How about this industrial chain change so much? First of all, the spot price is destined to be above, because it will never be enough to start work. Spot is scarce. The ranking probability of futures prices is back, because of two reasons: 1, the expectation of bulls returning to work leads to speculative shorts shorting all the way to Yuanyue; 2. Worried about the expected reshuffle of industry B, and the long-term shrinking demand will also lead to long-term bearish customers in the industry; As long as the chain keeps this pattern, the easiest way to make money is to buy all the way and eat the spot premium all the way.

Under what circumstances will this state of the chain change? Apparently at the top. If imported raw materials fall sharply, leading to a sharp drop in overseas spot prices, then this price protection behavior will automatically end; Second, the futures rose sharply, which far exceeded the spot price, causing the price to fall back and become a premium. This insurance will automatically end, but the probability is not high, unless people from industry B flock to futures to buy hedging-this is also my suggestion. Enterprises in industry B should do this, especially in the case of high back, which is tantamount to diluting the purchase cost.

This is my analytical thinking, from a large industrial chain to observe. The core issues are: who takes the initiative, who is strong, how to form a strong pattern, what are the sustainable conditions of strength, and what is the best strategy when the pattern is stable.

I didn't say the specific industry, I just gave an example. The commodity market is ever changing, and any similarity is purely coincidental. Never sit in the right place, never carve a boat for a sword.

(20 14-07-29 Zhuge just doesn't light the futures daily)