1. Market Review
After China’s Lunar New Year holiday ended, NR futures prices first dropped and then bounced back. RU2005 prices ranged between RMB 10,280/mt and RMB 11,385/mt. During the holiday, futures prices commonly dropped at TOCOM and SICOM. Besides, after the holiday ended, the market sentiment turned sour. In the first trading day, NR futures prices hit limit down. In the second trading day, NR futures prices on the SHFE started low. Then, some short-term bullish capital flowed into the market. NR futures prices performed strongly and bounced back sharply. However, due to the delayed re-open of factories and businesses, the sluggish demand and the accumulated inventory, pressure was felt in the futures market, and NR futures prices trended sideways.
As of February 6, the weekly average price of RU2005 was RMB 11,185/mt, down RMB 1,434/mt or 11.36% W-O-W. The weekly average price of NR2004 was RMB 9,427.5/mt, down RMB 1,137.5/mt or 10.77% W-O-W.
2. Downstream Market
All-steel tire: Influenced by some external factors, the operating rate at Shandong-based tire producers was low. Some semi-steel tire producers had to postpone production until next week. It was learnt that their inventories were enough for more than a month and a half. After the production re-opened, the inventories could meet the short-term demand.
SCI is monitoring 26 all-steel tire producers, and 10 of them have the capacity of manufacturing 3 million tires per year.
According to SCI’s data, the operating rate at Shandong-based tire producers was 9.40%, up 2.17% W-O-W and up 4.17% Y-O-Y.
Semi-steel tire: Influenced by some external factors, the operating rate at China’s semi-steel tire producers was low. Some tire producers had to delay the re-opening of production until next week. Only a few tire producers were manufacturing tires this week. It was learnt that producers had appropriate inventories to supply the market in the short term after they re-started production.
According to SCI’s statistics, the operating rate at China’s semi-steel tire producers was 10.06%, up 5.75% W-O-W and up 2.79% W-O-W.
3. Market Forecast
After the drop this week, NR futures prices have bounced back to a certain degree. Now, RU2005 price is hovering around the 5-day moving average line. The price bouncing back indicates that investors can take long position. In the short term, the price may move up further. However, the resistance line could be RMB 11,300-11,500/mt. Now, China’s market is going through a very special period. The demand is recovering slowly, and the inventories are building up gradually. A weak market can take some time to turn better. There’s a risk that the market will move down again. It’s predicted that NR futures price on the SHFE will be fluctuating in the range of RMB 11,000-11,500/mt next week.