No bright spots on the fundamentals
Judging from the global supply and demand situation, it is expected that the supply exceeds demand in 2019, and the global fundamentals are still not optimistic.
At present, the supply of natural rubber has declined slightly, but it is still at a high level. The supply of synthetic rubber has experienced a significant increase a few years ago and is also at a historical high. Overall, the total domestic supply of rubber is large, covering consumer demand and having the potential to increase as demand rises.
In terms of domestic consumption, despite the guidance of industrial policies and the support of export tax rebates, considering the impact of domestic tire exports, due to the influence of the country’s vigorous promotion of green industry in recent years, it is expected that domestic consumption will not be much improved in 2019.
In summary, in the long run, the basic surface of natural rubber is difficult to improve, and it is difficult to support the long-term sharp rise in rubber prices. In the short-term, in the context of frequent bad news, rubber prices have shown signs of recovery since the end of November 2018, indicating that the market has gradually digested the current bad news, and the probability of a sharp fall in the short term is not large. It should be noted that, if the climate of the major natural rubber producing countries is abnormal or an export policy to increase the price of rubber will be introduced, the price of rubber may rise in a short period of time.
Natural rubber production capacity is released
Since 2010, driven by the rise in rubber prices, Southeast Asian countries have begun to plant rubber on a large scale. According to the statistics of ANRPC, the rubber planting speed of Southeast Asian countries began to increase at the beginning of the 21st century. By 2010-2012, the newly planted gum trees in the main ANPPC rubber producing countries reached a peak, exceeding 300,000 hectares in three years. The area of rubber forest has declined, and the total planting area in the main producing countries of Asia has stabilized at approximately 12.15 million mu.
As the rubber forest matures, the rubber cutting area of ANRPC member countries has steadily increased, resulting in a certain increase in the total cutting area of Southeast Asian countries under the lower rubber price. In 2018, the total cutting area of member states is still as high as 9,604,700 mu, a year-on-year increase of 1.25%, which is the main reason for the increase in rubber production.
According to ANRPC organization statistics, due to the increase in the area of cutting, the global natural rubber production in 2018 was 13.96 million tons, an increase of 4.6%. From the output situation, the impact of low rubber prices on cutting rate is relatively limited, and global rubber production still maintains a relatively high growth rate.
The climate in the new season is still good, and there have been no floods. The production in India and Thailand is expected to increase further. ANRPC economists have higher expectations for global rubber production this year. It is expected to grow to 14.844 million tons in 2019, an increase of more than 6%. According to actual data, Malaysia’s raw rubber production in January, which has the largest number of abandoned countries, has increased by more than 30% in January. In summary, without natural disasters and other accidents, the total output of ANRPC member countries is expected to increase significantly in 2019, and global rubber output will remain at a historically high level.
ANRPC said that the global natural rubber consumption growth rate in 2018 was as high as 5.2%, reaching 14.02 million tons. It is believed that there was a certain supply gap last year. However, in view of the low consumption, high inventory and the trend of futures prices in the domestic downstream, the global natural rubber is still in a situation of oversupply. In addition, ANRPC analysts said that rubber consumption growth in 2019 may slow down to about 4% again, which has a further negative impact on the future rubber market.
ANRPC statistics show that the cumulative export volume of member countries in 2019 was 10.2826 million tons, down from 10.425 million tons last year, but still at a historical high. In terms of exports, Indonesia, Malaysia and Thailand account for about 60% of the world’s exports. At the end of February this year, the three countries reached an agreement to jointly cut 200,000-300,000 tons of rubber exports in the future. However, from the comparison of orders of magnitude, the current export reduction in Southeast Asia is too small. At present, various production subsidies and export policies in the upstream of the rubber industry chain are limited.
The fundamental situation of oversupply of rubber will not change at present, but the future policies, policies and climate of production, export and consumption will still have an impact on rubber production.
Domestic natural rubber supply is sufficient
As an important strategic material, natural rubber has attracted long-term attention in China. Although domestic production conditions are worse than those in Southeast Asian countries, there are still 832,000 tons of natural rubber production in China in 2018, a slight increase of 4.26% year-on-year. At present, the rubber planting area of the country has been clearly guaranteed, and the policy orientation also tends to further increase the production of natural rubber. In 2019, the domestic rubber supply is likely to maintain a steady growth.
Natural rubber imports account for the vast majority of China’s natural rubber supply, and its import volume is related to actual inventory and downstream consumption. In 2017, the tire market recovered, driving the surge in imports. In 2018, the consumption growth slowed down, and the decrease in demand led to a slight decline in the import of natural rubber. The statistics of the General Administration of Customs showed that the total amount of natural rubber imported in 2018 was 2.6 million. Tons, a year-on-year decrease of 7.47%.
Affected by various external policies at the beginning of the year, this year’s downstream consumption prospects are not good. From January to February, China’s total imports of natural rubber were 280,000 tons, a decrease of 70,000 tons compared with last year.
Synthetic rubber supply is at historically high level
From the data point of view, the substitution of synthetic rubber has been reflected since 2014. The domestic synthetic rubber output reached 5.323 million tons, a year-on-year increase of 30.18%. From 2014 to 2017, domestic synthetic rubber production has maintained a steady growth level.
The production of 5.59 million tons of synthetic rubber in 2018 is slightly lower than that of the previous year. It is expected that the output will fully play its current substitution role. However, the overall domestic output of synthetic rubber is still at a historically high level, and it is synthesized in 2019. The probability of rubber production is basically the same as last year.
At the time of domestic demand increase in 2017, synthetic rubber imports solved some rubber supply problems. In the year, the total import volume of synthetic rubber reached 4.36 million tons, a sharp increase of 31.72% year-on-year, and the import dependence increased from 38.67% to 42.14%.
Imports of synthetic rubber changed little in 2018, at 4.41 million tons. From the data of the first two months of 2019, the import volume of 710,000 tons is not much different from the import volume of 730,000 tons in the same period of last year. It is estimated that the total domestic imports of domestic synthetic rubber will remain around 10 million tons this year.
Domestic tire export volume declines
In 2018, there were more consumption variables in rubber downstream. On the one hand, various environmental protection policies were implemented in China to boost heavy-duty consumption. On the other hand, Sino-US trade friction has adversely affected tire exports.
From the perspective of downstream consumption, the impact of trade friction on China’s tire production and exports is more obvious. According to the National Bureau of Statistics, the total number of rubber tires produced last year was only 8,164,100. According to the statistics of the General Administration of Customs, a total of 486.22 million new rubber tires were exported last year, with a growth rate of only 0.6%.
On the other hand, domestic automobile production and sales are not optimistic. According to the statistics of the Automobile Industry Association, in the year of 2018, a total of 27,900,200 vehicles were produced in China, a year-on-year decrease of 4.16%, and the sales of automobiles was 2,806,000, a year-on-year decrease of 2.76%. The growth rate of rubber consumption and exports in 2018 is obviously less than the level of 3%-4% in previous years.
Although trade friction has eased, the domestic tire export situation is still grim this year. At the end of 2018, the European Commission officially announced the final ruling of the EU anti-dumping and anti-subsidy cases against Chinese tires, and began to impose a fixed specific tax on the tires exported to China. On February 15, 2019, the United States also imposed a corresponding ad valorem tax on tires officially exported to China through a “double-reverse” ruling. On March 29th, India also imposed a corresponding ad valorem tax on the tire subsidy behavior in China.
This year, China’s tire exports have been significantly suppressed. At present, the total amount of rubber tires exported from January to February in 2019 is only 73.24 million, a year-on-year decrease of 3%. As a result, rubber consumption has also decreased. The output of the tires in the first two months decreased by 7.3% year-on-year to only 111.218 million. In the context of the tire industry rectifying and vigorously promoting environmentally-friendly industrial development, the automobile and tire industries will still need to recuperate for a while in the future.
Option strategy analysis
The rubber option was officially listed on January 28, 2019. Through the option trading, the trading risk can be controlled more flexibly, and the option strategy can be designed for different market conditions.
Based on the closing market on April 12, the relevant strategies are designed as follows:
Conservative strategy: Based on the above analysis of the short-term sharp drop probability, considering the risk, return, liquidity, and remaining time value, consider selling the RU1909 option contract with a strike price of 11,000 yuan/ton. The planned holding period is one month. If the rubber price falls below RMB 1,1500/ton, investors should pay close attention to the price trend and stop the loss in time.
Aggressive strategy: Based on the above-mentioned short-term sharp drop probability and the fundamentals do not support long-term sharp rise analysis, consider selling RU1909 put options with a strike price of 11,500 yuan/ton and RU1909 selling a strike price of 13,000 yuan/ton. Call options, build a sell-wide broad-span strategy, the plan holding period is one month. Compared with the conservative strategy, this strategy raises the strike price of selling put options to obtain higher yields, and also bears higher risks. Investors can choose the corresponding exercise price according to their own risk preferences. The strategy also sells call options based on analysis that the fundamentals do not support long-term sharp rises, but as mentioned above, rubber prices may be short, such as climate anomalies in the major natural rubber producing countries or export policies that increase rubber prices. Investors should pay close attention to such information within a time period, and should immediately close the call option position once it appears.
Selling a wide-span strategy has a large profit opportunity, but it is an option strategy with limited profit and unlimited risk. Therefore, it is necessary to set a stop loss point above and below the current target futures price. In this case, if the price of rubber fell below 1,1,500 yuan / ton or rose by 12,500 yuan / ton, investors should pay close attention to price trends and stop losses in a timely manner.
Aggressive strategy: Based on the current signs that rubber prices are picking up and the export policy of the natural rubber producing countries in the future, or the introduction of an increase in rubber prices, aggressive investors may consider building a bullish price difference portfolio to capture the short-term rubber price gains. Compared with conservative strategies and aggressive strategies, rubber prices can be profitable if they fall slightly, do not rise or fall, and rise slightly. This strategy requires a rise in rubber prices to make a profit, and the strategy win rate is much lower. It is recommended that investors can The potential maximum loss of the strategy combination is controlled within a small percentage of total funds, such as 5%.
Taking the aggressive strategy as an example, the initial margin occupation is 28,552 yuan, and the maximum actual rate of return due to maturity is 25.99%. In view of the relatively large fluctuations in rubber futures prices, it is also a reasonable choice to close the position after the short-term holding has not changed much. If you leave the market after one month, the maximum expected return is 5%-6%.
Translated by Google Translator from http://www.cria.org.cn/newsdetail/48454.html