Point 1: Reaffirm the long-term rising logic of natural rubber. The rise of natural rubber lies in the fundamental changes. The emergence of high points on the supply end and the stimulation of the demand side lead to the arrival of natural rubber. With the gradual improvement in fundamentals, we reiterate the logic of natural rubber.
Point 2: The main producing country reduces exports, and the supply turning point may appear. The International Tripartite (Thailand, Indonesia, Malaysia) Rubber Council reached an agreement on the 22nd meeting, which indicated that the three countries will limit exports of up to 300,000 tons. The reduction of exports by the three countries may lead to the inflection point of supply.
Point 3: Policy stimulus, rubber demand is expected to exceed expectations. In January 2019, the NDRC approved infrastructure projects such as airports, rail transit and railways, which were about 470 billion yuan, accounting for 45% of the total approved in 2018. The infrastructure construction is expected to increase significantly in 2019, which is expected to improve the use of construction vehicles. At the same time, the implementation of the policy of car going to the countryside for passenger cars, passenger cars are expected to change the trend. Under the background of increasing car insurance, the demand for natural rubber is unlikely to decrease. Under the stimulus of the policy, the demand for natural rubber is expected to expand, which will cause the demand for natural rubber to exceed expectations.
Point 4: El Niño has a 70% probability of occurrence, and the weather is expected to be a key factor affecting the production of natural rubber.
Starting from October 2018, according to the US NOAA data, the sea surface temperature continues to rise above the long-term average of 0.5 °C, and the possibility of El Niño is greatly increased. According to the latest data from the Japan Meteorological Agency, the possibility of El Niño is as high as 70% in 2019, and the weather is expected to become an important variable affecting the supply of natural rubber.
Point 5: Conservative estimates, there will be a shortage of natural rubber in 2020. According to relatively conservative forecasts, we split the demand for rubber and judge that the demand for rubber products is about 3.2%. The demand for rubber products for latex products is about 4.1% per year, shoes are about 3.2%, and the increment of industrial products. It is about 4.2% and the increase in binder is about 7.3%. The annual rubber demand is about 3.55%, and the supply of natural rubber is about 11%. We estimate that there will be a shortage of natural rubber in 2020, and the supply and demand gap will gradually enlarge after 2020.
Point 6: If the net is exhausted, natural rubber will be reversed. Natural rubber has been suppressed by many aspects such as high inventory and weaker car sales, but the supply of natural rubber has reached a peak and supply continues to increase. At the same time, domestic natural rubber fell below the cost of tapping, and the phenomenon of abandonment increased. The rubber-producing countries in Southeast Asia also entered a period of cessation. Natural rubber stocks were gradually consumed, and inventories in bonded areas decreased, and natural rubber began to destock. Natural rubber is expected to begin its boom cycle in the context of various negatives.
Risk warning: 1. Natural rubber demand is less than expected; 2. Sino-US trade friction uncertainty