Natural rubber valuation rises low or may be expected

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Summary

Overall, 2020 will remain a loose supply and pattern. Although the growth rate of cutting area is approaching an inflection point, based on the favorable weather and high yield next year, the peak of production has not yet gone. We predict that the total output of natural rubber next year will be higher than this year. On the side, there is a greater possibility of improvement. The previous heavy truck replacement during the peak sales period of the three countries and four countries will drive sales growth next year. In addition, the investment in special debts for infrastructure construction will increase, and the increase in transportation capacity will also increase the heavy truck tire Replacement requirements. In October this year, the newly started and completed areas of real estate both increased at a rate of 20% year-on-year (the highest growth rate during the year), and the toughness of the real estate industry again exceeded market expectations. In addition, Sino-US relations have achieved gradual easing at present, and macroeconomic conditions will also boost downstream markets.

Against the backdrop of a reduction in natural rubber production in 2019 and a halt in the first quarter of 2020, we expect rubber prices to perform strongly in the first quarter, but as the major producing countries enter the production increase cycle in the later period, rubber prices will lose supply-side reductions. Support. In view of the expected improvement in demand next year, it is expected that the price center of gravity will move upwards throughout the year, and the main contract as a whole will fluctuate between 1,200 and 15,000, and the high point may break through 16,000 yuan. Here are our recommended strategies:

Unilateral strategy

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As we all know, the price of rubber has been at the bottom of the large cycle for a long time, and the loose fundamental pattern is difficult to reverse for the time being. However, there is a strong atmosphere for long positions in the market and people’s minds are rising. Any bullish news with insufficient certainty will trigger long entry. In view of the fact that the main producing countries in Southeast Asia entered the production reduction cycle in the first quarter and domestic cuts were stopped, we expect that the 05 contract may reach a new high. The price has recently fallen back, and it is recommended that the first quarter dips the long 2005 contract.

Arbitrage across varieties

Since the listing of No. 20 rubber , the main contract spread between RU and NR has fluctuated between 1700-2100 yuan, and domestic cuts will be stopped in January-February next year. At the same time, holidays and full milk production will be cut. In the peak season of finished product output, it is recommended that when the price difference between the two is low, arbitrage strategies can be used to buy RU and sell NR.

I. Review of Natural Rubber Markets in 2019

The trend of Shanghai glue in 2019 is mainly at the bottom, which fluctuates between RMB 10,500 / ton and RMB 13,000 / ton. Due to the loose domestic funds after the Spring Festival in February, the heads of China and the reached a consensus on the settlement of trade frictions at the G20 summit on December 1, 2018. Under the positive expectations of the late market, rubber prices rose slightly. And the news of domestic plans to lower the value-added tax also stimulated traders and downstream rubber companies to actively buy. However, due to poor downstream demand data, automobile production and sales continued to decline, causing the main contract to decline after breaking through 13,000 yuan. After May, due to the strict inspection of the mixed rubber policy by the customs, the import volume has decreased sharply, and the price of rubber has risen again. At this time, the region of Yunnan has just entered the cutting season. The impact of dry weather on the progress of the cutting rubber has also pushed up the price, but in June, it followed. The output of major producing countries in Southeast Asia has resumed, strict inspection of the mixed rubber policy has been relaxed, and automobile production and sales have continued to decline. After a brief spike, Hujiao prices continue to fall and fall back to the bottom. From July to August, the price of rubber has been fluctuating at the bottom. The Sino-US trade negotiations have been difficult. The main producing countries have gradually entered the peak production season. Under the pressure of multiple negative factors, the price of rubber has still maintained its bottom line of 10,000 yuan. The negative factors are also largely exhausted. In early September, due to the drought of Thailand and Indonesia, the price rose slightly, but the market is no longer sensitive to the subject of such speculation in the main producing country. Subsequently, a large domestic trader broke the capital chain, and the market was panicked, driving futures prices. Down. After the eleventh, entering the traditional strong quarter of rubber, the downstream demand has improved, and the car has entered the “golden nine silver ten” consumer season, and heavy truck data has frequently given surprises. The price of has continued to increase. The good news that the negotiated the first phase of the agreement, Hujiao surged sharply twice, and the price returned to the vicinity of 13,000 points. On the whole, subject to the fundamentals of oversupply, the price of rubber hovered above 10,000 yuan throughout the year, and the fluctuation rate throughout the year was significantly lower than in previous years. However, the bottom of the countless times has not exceeded the 10,000 yuan mark. Today’s supply and demand situation Expected to improve, market sentiment is improving, rubber prices gradually strengthened off the bottom.

Second, the global supply range in 2020 or 3%

In 2019, major producing countries such as Thailand and Indonesia saw production reductions to varying degrees due to weather and disease. The reduction in production in Thailand was mainly due to the dry weather in the early stage of the cutting, which delayed the actual cutting period by nearly one month, and the processing enthusiasm of the factory was not high due to processing losses. Following this, the rubber production rebounded during the peak production season, but the output was still reduced throughout the year. Indonesia is also suffering from drought this year, and the outbreak of fungal diseases has caused a serious reduction in output. The government said that this year’s reduction in output is about 15%, but the actual reduction in output is estimated to be no more than 8%. This year ’s output in Vietnam has also been affected by abnormal weather. However, due to Vietnam ’s high output growth in recent years, in addition to the El Nino weather in 2016, it has maintained an annual output increase of more than 5%. Growth will slow down. China’s production cut in Yunnan province in the beginning of May this year was also affected by dry weather. As a result of the weather in the second half of the year, most factories may have adequate raw materials at the end of the year to make up for the loss in the first half of the year. The forecast of supply in 2020 is mainly based on consideration of cutting area, raw material yield, processing profit, and weather. We expect that there is a high possibility of an increase of 3%.

Cutting area: arrival of the inflection point of speed increase

First, the inflection point of the growth rate of the cutting area has arrived. After 7 years of rubber tree planting, the new cutting area in 2020 = the new planting area in 2013-the replanting area in 2019. It can be concluded that the new cutting area in 2020 is about 300,000. About ha. In recent years, there have been two peaks in the newly planted rubber area, the first appeared in 2007-2008 and the second appeared in 2010-2012. Looking at a 7-year planting cycle, the trees planted in 2010-2012 have also The tapping started in 2017-2019, and the new planting area has begun to decrease significantly since 2013. Therefore, 2020 is the inflection point of the growth rate of cut area. It is expected that the new cut area will decrease at a rate of 10 hectares per year in the next few years. However, it should be noted that although the newly cut area is decreasing, the actual cut area is still increasing. In addition, in the recently announced 20-year plan, the Thai government plans to reduce the domestic rubber tree plantation area by 21%, from 23.3 million rais (3.73 million hectares) in 2016 to 18.4 million rais (about 2.946 million hectares). However, the implementation period of this plan is 20 years, and the rough calculation is to reduce 1% per year. According to the estimation of Thailand’s natural rubber production in 2019, the annual output of natural rubber will be reduced by about 51,000 tons. Obviously, compared with Thailand’s current annual output of nearly 5 million tons, the reduction of 51,000 tons is more limited.

Yield: Inadequate maintenance affects yield, but the proportion of high-yielding tree age is still increasing

From the perspective of yield, there will be more trees in the peak production period in 2020. The newly-increased trees in 2007-2008 are currently at the peak production cycle. Trees planted around 2010-2012 are expected to usher in a peak yield per year, so the proportion of high-yielding trees is still increasing. However, due to the continued slump in rubber prices, the income of rubber farmers cannot be guaranteed, and the funds for maintaining rubber parks are limited. The long-term neglect of rubber parks will lead to lower rubber tree output. And poor management has caused fungal diseases in Thailand and Indonesia this year, affecting yields.

Weather: Good chance next year

In terms of weather, no authoritative agency has issued a clear report on abnormal weather next year. In the current supply and demand structure, demand is relatively stable each year, and it is supply that affects prices more, and weather is the most direct factor affecting output.

Processing profit: high processing profit stimulates capacity release

Processing profit is also an important factor in determining output. At the beginning of this year’s cutting in the main producing country, processing is at a loss, which further affects rubber production. From the third quarter of this year, processing profit has continued to rise. The processing profit will stimulate the large-scale release of production capacity in the fourth quarter until the coming of the major cut-off countries in the next year.

In general, due to production cuts in 2019 and cuts in Southeast Asia in the first quarter of 2020, the current strong performance of rubber prices will stimulate the next increase in the output of finished rubber products. Supporting prices will also allow farmers to maintain rubber parks more carefully and improve Yield. Therefore, under the premise of no abnormal weather interference next year, combined with the cutting area, yield, tree age and other conditions to speculate, and exclude uncertain factors such as extreme weather and insect pests, we that the total production of natural rubber in 2020 will be higher than the reduced In 2019, the total output increased by about 3% compared to 2019, with an increase of about 300,000 tons.

3. Slight increase in steady demand

The downstream demand for rubber is mainly divided into supporting demand, replacement demand, and export. The supporting demand depends on the prosperity of the automotive market, including passenger cars, commercial , and heavy . The replacement demand is linked to infrastructure and depends on the national macro economy. Foreign demand and international economic relations.

Automotive: Overall remains sluggish, and consumption potential is still large

The auto market continues to be sluggish in 2019. The main influencing factors of the auto sector this year are the switch between National V and National V and the second is the decline in subsidies for new energy vehicles. Many manufacturers have adopted price reduction measures in order to digest the of the National V. In recent months, the sales of National V vehicles have been good. From January to November, China’s cumulative output was 23,015,900 units, a decrease of 8.97% year-on-year in 2019. Monthly output in January-October this year decreased year-on-year, and November output finally exceeded 2018, reaching 2.593 million units, an increase of 12.96 %, A year-on-year increase of 3.78%. Since April this year, automobile production has fallen sharply compared with 2018, and April-July production has decreased by 16.3% compared with April-July 2018. Therefore, since August, although year-on-year growth is still lower than last year, the chain growth rate has been increasing . From January to November, the cumulative sales volume of automobiles was 23.0926 million, a year-on-year decrease of 8.99%. In summary, the monthly sales of automobiles have picked up but the overall downturn. Although the dealer’s warning index is high but the year-on-year pressure is reduced, near the end of the year, December sales are optimistic.

The focus of the future industry shifts to new energy. On December 3, the Ministry of Industry and Information Technology issued the “Development Plan for the New Energy Vehicle Industry (2021-2035)” (draft for comments). By 2025, the sales volume of new energy vehicles will reach 25%. Analysts point out that if 30 million new car sales are calculated in 2025, the sales of new energy vehicles in the Plan’s development vision may reach about 7.5 million. New energy vehicles may become a new growth point.

Although the Chinese auto market has been in a downward trend since the second half of 2018, many experts and scholars in the industry still have a positive attitude towards the prospect of the auto market. According to the World Bank’s data on the number of thousand-person cars in 20 major countries in the world in 2019, China has 173 cars per 1,000 people, ranking 17th in the list. The first place in the United States has 837 cars per 1,000 people, which is five times that of China. So in the longer term, there is still a lot of room for growth in the Chinese auto market.

Heavy truck: in the boom cycle, optimistic about sales next year

Since the beginning of this year, the heavy truck market has achieved seven-month growth and a four-month decline. Especially since the second half of the year, the heavy truck industry has completed the “five consecutive gains”, and the increase has expanded month by month since August. In January-November, China’s cumulative sales of heavy trucks amounted to 108.18 million. The heavy truck data are mainly due to the following reasons: 1. After an elevated accident in Wuxi, Jiangsu in early October, a new round of more stringent road overload management in China began. Brings new demand for heavy trucks. Under the requirements of strict control of overload, the weight of heavy trucks has decreased by about 3 times compared to the original single-car when overloaded, so new vehicles need to be purchased to make up for the transport gap; 2. From 2009 to 2011, the implementation of the National Three and Four policies of heavy truck During this period, the rate of heavy trucks was very obvious, and this batch of heavy trucks has now reached the stage of updating and replacing, so the demand for replacement of new cars has also contributed a large portion of the demand increase. Real estate will decline in 2020, but the first batch of special bonds will be issued as early as January 2, 2020. The special bonds will mainly be used to supplement the shortcomings of people’s livelihood infrastructure and service projects. This will also increase the strength of the infrastructure sector. Demand of the heavy truck market.

Tires: major changes in export patterns

The performance of tires in 2019 was slightly unsatisfactory. The cumulative output from January to October was 581.6 million, a decrease of 4.37% year-on-year, and exports from January to October were 41629 million, an increase of 3.70% year-on-year. Under the background of the tense relationship between China and the United States, the export growth can be attributed to the development of emerging markets by Chinese tire companies. Major tire factories have set up factories overseas, shifting production capacity, and most of the tires exported to the United States come from Southeast Asian factories. In 2019, China’s tire exports to the United States decreased by 40% year-on-year, but the emerging replacement markets in Africa and the Middle East have achieved good results. For example: from January to September, exports to Colombia increased by 171%, exports to Iran increased by 79%, and exports to Venezuela were 207%. , Exports to Malaysia 74%, so make up the gap to the United States and improve the overall export data. Later, we need to pay more attention to the overseas transfer of tire factories.

In 2020, although we are not optimistic about supporting demand, replacement demand may drive tire demand growth. From January to October, road freight volume will increase by 5.24% year-on-year, and the growth rate will slow down. However, there will be support for special debt infrastructure investment next year. With the easing of monetary policy to stimulate consumption, we expect road freight volume growth to be better than 2020. In addition, the sales volume of heavy trucks in 2017 increased greatly year-on-year. This batch of heavy trucks has also reached the tire replacement cycle by 2020, which will bring about an improvement in the market demand for tire replacement.

Fourth, domestic supply and demand balance forecast

Consumption is relatively stable every year, so the supply and demand pattern of rubber is more determined by the supply side, and China’s supply is mainly determined by two parts, imports and domestic output.

Import: weak demand for arbitrage, insufficient driving force for imports

The import volume in 2019 is significantly lower than in 2018, mainly due to the implementation of the strict inspection of the mixed rubber policy by the customs and the reduction of non-standard arbitrage demand. According to data released by the General Administration of Customs of China, China ’s total imports of natural and synthetic rubber (including latex) from January to October were 5.198 million tons, down 8.52% from 5.683 million tons in the same period last year. Since May this year, the customs have strictly required the customs clearance standards for mixed rubber, that is, each cut must contain both natural rubber and styrene-butadiene rubber, which has hindered the clearance of mixed rubber. Lower than previous years. After June, the customs clearance rate has gradually recovered, and the import volume has also rebounded. Although it has rebounded, it has been less than last year. In addition, the reduction in demand for non-standard arbitrage is another important reason for the impact of imports. This year, the base spread has strengthened, and the lowest value for the whole year has been only -1,350 yuan. 2019 will further strengthen on the basis of 2018. The main difference between the whole milk futures and the basis of the mixed rubber is the same. The current basis is at the lowest point of this year -1300. The September contract was forced by the delivery pressure in July and August this year and even the situation of discounted mixed rubber appeared. Non-standard arbitrage opportunities Being completely restricted is also an important reason for the reduction in imports this year. In 2020, it is expected that the basis will still have little arbitrage opportunities, and the probability of large monthly premiums in the far-month contract is not large. It is expected that under the background of next year’s production increase, imports will increase compared to this year, but the increase will not be too large.

Domestic production: production pattern changes, whole milk production is reduced

It is expected that the total domestic rubber production in 2019 will be basically the same as last year, the total milk output will shrink, and the proportion of concentrated milk and standard rubber production will increase. Yunnan production area suffered from dry weather during the early stage of cutting and the tapping was blocked, which caused the output in May to be significantly lower than the same period of last year. However, the weather in the later period was smooth, the output returned to normal in the second half of the year, and the raw materials were sufficient. Will, so it is expected that the total output this year will not be lower than last year. In addition, since the profit of whole milk processing is not as good as that of concentrated latex this year, the processing costs of the two are basically the same. However, due to the high consumption of concentrated milk downstream products, the profit difference is about 1,000 yuan, so the factory is generally inclined to produce concentrated milk, which has led to the reduction of full milk production this year. The registration volume of new warehouse receipts decreased. In 2020, if the pattern of thick milk profits is higher than that of whole milk, the production capacity of whole milk will be squeezed, and the reduction of whole milk production will also benefit the price of Hujiao to a certain extent.

Inventory: The amount of warehouse receipts is reduced, and the whole is in the process of destocking

From May of this year, the inventory of is in the process of destocking. The total amount of bonded stocks and general trade inventories in early May was close to 700,000 tons, and the total inventory as of early December was 520,000 tons, a decrease of half a month. Destocking at a rate of 26%, compared to a 26% high in May. The strict inspection policy for mixed rubber and the reduction in non-standard arbitrage demand are the main reasons for the reduction in inventory. At the beginning of 2020, the supply of raw materials will be sufficient, and the major producing countries in Southeast Asia will have good processing profits and a large amount of capacity will be released. It is expected that domestic arrivals will increase by then. If the current price gap next year widens, the opening of the arbitrage window will also increase imports.

In addition to the stock in the bonded area, the inventory also includes the stock of the exchange. At present, the registered volume of new warehouse receipts has increased rapidly year-on-year. Due to the better trend of the previous Shanghai glue, the basis gap has widened, which has increased the enthusiasm for registration of warehouse receipts. However, since the old rubber was collectively cancelled in 2018, the total amount of new rubber still has a large gap compared with last year. The amount of warehouse receipts on the exchange depends more on domestic total milk production. If the total milk production capacity continues to be squeezed next year, the number of warehouse receipt registrations is estimated to be less. If the demand for whole milk is good and the price is supported, it will also Stimulate factories to switch to more whole milk and increase warehouse receipt registrations.

In general, the inventory will pick up by March 2020 due to the increase in the supply of natural rubber products in Southeast Asia. The subsequent inventory will depend more on whether the trend of the term spread can open the arbitrage window. The correction of the spread will also limit the appearance of non-standard arbitrage windows. Standard plastic storage and delivery costs are higher than full latex, and there are frequent problems in the current delivery process. Therefore, there is not much opportunity for direct futures arbitrage of standard rubber spot and No. 20 rubber futures. Non-standard arbitrage is still arbitrage. Mainstream. Then it is concluded that the possibility of increased imports due to arbitrage opportunities next year is unlikely, and it is expected that next year will still be in the process of destocking and low inventory.

Source: Lujiazui Commodities Forum

Translated by Google Translator from http://www.cria.org.cn/newsdetail/52669.html

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