I. Market review and analysis
In 2019, the overall rubber is in a range of shocks. There is a top and a bottom shock. The new coronavirus epidemic has caused the rubber index to fall below the 10395 low since 2018, and the main 05 contract has also fallen below the 2018 low, breaking the shock range of nearly four years.
For the impact of this epidemic on rubber, you can refer to the trend during the SARS period in 2003. After the SARS epidemic broke out, the rubber index fell sharply, with the largest drop reaching 35.7%, breaking the original upward trend market until June 24. The organization excluded Beijing from the epidemic area and began to stop the decline. After the SARS epidemic ended, the rubber index gradually repaired in the second half of 2003, continuing the previous bull market, with the largest increase of 70.5%, breaking the high point since the listing of rubber futures.
The outbreak of the new coronavirus coincided with the closing of the Spring Festival. With the spread of the epidemic, on the evening of January 30, World Health Organization Director-General Tan Desai announced in Geneva that the outbreak of Chinese new coronavirus pneumonia has constituted a Public Health Incidents “(PHEIC), while stressing that travel and trade restrictions are not recommended. According to the development of the epidemic, PHEIC can be revoked and modified at any time after the announcement. The decision is valid for three months and expires automatically afterwards, requiring a re-evaluation of the location. Panic spread, and most commodity futures opened their daily limit.
On the first day of market opening, on February 3, the rubber 05 contract stopped falling, and the limit board was not opened throughout the day. On February 4, it opened lower with a decrease of 4.87%, rebounding all the way, and the panic was further released.
Until the epidemic broke out, the fluctuation of rubber was mainly due to expectations and emotions, but it was not reflected in the real economy. The impact on the macro economy and the rubber industry chain still took time, and the fluctuations affecting rubber in the later period were still caused by the supply and demand of rubber. The actual effect will be dominant.
2. Spot market structure: relative oversupply, increased demand uncertainty, price or pressure
1. Supply is stable, and the overall pattern has not changed much
The concentration of rubber cultivation areas has been formed, and the supply is mainly concentrated in Southeast Asian countries, with relatively stable production. Thailand and Indonesia account for 60% of the planted area and are the main producers; China’s share is small, less than 10%. Domestic natural rubber is mainly imported.
In 2003, the proportion of ANRPC rubber cut area to the total planted area was 72.76%, and the highest proportion in 2006 was 75.91%. It is expected that the proportion will be 75.1% in 2019, an increase of 0.68 percentage points from the previous year. In the past 17 years, the proportion has remained at 70.07% to 75.91%, which is relatively stable overall.
At the beginning of 2011, the price of rubber increased, and the index reached a high of 43,293. In the same year, the rubber planting area expanded significantly, and the area growth rate was as high as 9%, which was much higher than the previous 3% -4% increase. The age of rubber trees is generally 20-25 years, and rubber milk can be harvested in about 5 to 7 years, reaching a high yield period in about 16 years, and rubber production in 2018 and later years may be on the rise.
In order to boost the price of rubber, the main producing countries have adopted a number of measures, but no significant effect has been seen. From the end of May to the end of September 2019, the rubber tripartite committee consisting of Thailand, Malaysia and Indonesia agreed in March to jointly reduce the export volume of natural rubber by about 240,000 tons. The three countries eventually cut exports by 440,000 tons, and the price of rubber has risen but has not yet broken the original range. In the first seven months of 2019, the total output of ANRPC member countries was 6079.3 thousand tons, a year-on-year decrease of 9.01%. It is expected that the output in 2019 will be lower than last year but still higher than 2017. In November 2019, Zhu Lin Lasanawisich, Minister of Commerce of Thailand, said that With the expiration of the rubber export restrictions in the three Southeast Asian countries, Thailand will adopt a policy to encourage the export of natural rubber to increase farmers’ income. Thailand is actively seeking rubber exports, and domestic rubber consumption in Thailand has not changed much.
The new coronavirus epidemic currently has less impact on the major rubber producing countries, with 25 confirmed cases in Thailand, and no confirmed cases in Indonesia. There is a small probability of a large-scale change in the supply side in the short term. In 2019, the output may decline slightly, but there is still an excess.
2. Demand uncertainty strengthens, market forms weak expectations
China has a large demand for natural rubber and is a major consumer country. Since 2016, consumption has accounted for more than 45% of the output of the Natural Rubber Producers Association (ANRPC). In 2003, China’s natural rubber consumption accounted for less than 20%. The consumer field is mainly concentrated in the tire manufacturing industry. 70% of the world’s natural rubber is used to produce tires; rubber products such as gloves, ice sacs, and sponge cushions for medical and health purposes account for a relatively small amount, and there is currently no demand. Growth is still dominated by traditional demand.
Recent market sentiment mainly comes from three aspects:
One is that the delay in downstream operations and limited logistics transportation will affect the consumption of natural rubber, which will have a negative impact on the market. The commencement of industrial parks in many regions has been postponed. At present, it is postponed until February 9. Corresponding demand recovery has been delayed, and downstream production has been suppressed, which will reduce the consumption period of rubber raw materials;
Secondly, the epidemic situation is still expanding, the number of confirmed diagnoses is rising, and the macroeconomic pressure is increasing;
Third, the price of crude oil fell, and once the US crude oil fell below the $ 50 mark, the substitution effect of synthetic rubber on natural rubber appeared.
Automobile and tire consumption:
At the end of 2018, the number of domestic car ownership reached 240 million units, an increase of 10.51% year-on-year; in 2019, the number of motor vehicle ownership nationwide reached 348 million units, an increase of 6.4% year-on-year; The huge holdings provide a broad market basis for the development of the tire industry; although affected by policy factors and macroeconomics, auto output fell by 4.16% in 2018 and sales fell by 2.76%; in 2019, auto sales fell by 8.2%, but new energy Cars maintained rapid growth. As of the end of 2019, the number of new energy vehicles in the country reached 3.81 million, accounting for 1.46% of the total number of cars, an increase of 46.05% compared with the end of 2018. Among them, the number of pure electric vehicles was 3.1 million, accounting for 81.19% of the total number of new energy vehicles.
Looking back on the past 17 years, China’s automobile production and sales maintained a rapid growth before 2010, and the growth rate began to decline in 2011, showing negative growth for two consecutive years in 2018 and 2019. Car sales data rose from 18.061 million units in 2010 to a high of 28.889 million units in 2017. Correspondingly, the output of tyres increased steadily from 2014 to 2017, reaching a maximum of 653 million in 2017. In 2018, the output of tyre tires was 648 million, a year-on-year decrease of 0.7%, and the output in 2019 will still decline.
In December 2019, 2.658 million vehicles were sold in a single month, a decrease of 0.1% year-on-year, and the decline was narrowed. During the new coronavirus outbreak, car sales in the first quarter of 2020 are expected to be lower than in the same period of the previous year.
Overall, the production and sales of automobiles have been declining for the past two years. The possibility of continued decline in 2020 is not excluded, and the corresponding tire output will also be reduced. During the epidemic, the production and sales data of automobiles in the first quarter were not optimistic, or will be significantly lower than in the same period of the previous year, and the epidemic situation is still expanding. The actual data cannot be estimated at present.
3．The cost of rubber constitutes a certain support, and the margin of price safety has increased
The production cost of natural rubber is mainly composed of three parts: one is the cost of rubber cultivation; the other is the labor cost of tapping rubber; the third is the cost of processing and transportation. Tapping labor costs account for most of the cost of rubber. Except for some family-type small and micro rubber gardens, which are tapped by rubber farmers on their own, rubber gardens of medium and larger scales generally employ workers to tap the rubber. The labor input in the tapping process is the largest share of natural rubber production costs. The rapid rise in labor costs has brought great challenges. It has significantly reduced the comparative benefits of rubber cultivation and the rubber price has continued to slump in recent years. The domestic rubber profit in Hainan has continued to decline. Gross profit margin was negative. According to relevant agencies’ estimates, the impact range of domestic tapping will be 11,000-14500 yuan.
Thai rubber processing technology is advanced, the production scale is large, the degree of mechanization is high, and the per capita labor productivity is high. In recent years, Thailand’s economic development has been relatively stable, and salary levels have continued to rise. According to relevant information about rubber planting in Thailand, the daily salary level of labor costs in Thai rubber areas is 320-350 baht per day. Converted to the futures market price of less than 9,500 yuan / ton.
The cost advantage of Southeast Asian countries is relatively obvious. The rubber price has continued to decline in the past 10 years. The spot price of imported tobacco films has been less than 13,000 yuan / ton in the past 2 years. Under the situation that the profit margin of China Rubber has been compressed, the output has not changed much in recent years, and the situation where supply exceeds demand may continue. However, the current price may be close to the break-even point, and the safety margin has improved.
Domestic rubber plantation companies have made losses, but domestic rubber plantations are dominated by strategic material reserves. Even if prices fall, the planting area will not shrink significantly. The planting advantages in the main producing countries are obvious. Although prices have fallen, the overall output growth trend has not Fundamental change, there is still a certain margin of profit, the price may have some support without the international demand has been significantly reduced.
3. Conclusion: The panic has broken the original trend, and the impact on the entity has not yet been reflected.
In short, the outbreak of this epidemic has increased the downward pressure on China’s economy, which may have a certain impact on the macro economy. If the epidemic is controlled in the first quarter, the overall impact is low, but if it lasts for a long time and its scope Expansion will actually reflect the real economy, which may drag down the actual operation of the economy. At present, it only affects directly related enterprises such as catering, tourism, film, transportation, education and training, and rubber companies have not effectively reflected it.
At present, the impact of China’s epidemic on the world is relatively limited, but the domestic epidemic has not yet reached an inflection point, and the market is greatly affected by emotions. The volatility of rubber futures is currently mainly affected by market sentiment and expectations, and does not have a trend; in the later period, it is necessary to pay close attention to the development of the epidemic and the impact on rubber companies. It is recommended that prudent investors wait and see in the short term, and aggressive investors can trade long short spreads at low levels within the day. It is expected that the data in the first quarter will have a greater probability of decline. It is not recommended to arrange mid-term positions at this time. If the epidemic situation is similar to the impact of SARS in 2003, the probability of the rubber trend returning to the original interval is greater, and it may be more bargain-hunting; , Then the domestic consumption of rubber does not rule out the possibility of a substantial decline, in the case of oversupply, or may put strong pressure on rubber prices.
Translated by Google Translator from http://www.cria.org.cn/newsdetail/53078.html