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Saturday, May 21, 2022

Rubber rebounds are met with resistance

The U.S. will impose sanctions on Iran, and the decline in U.S. crude oil inventories is greater than expected, and the international oil price skyrocketed to boost the chemical market. On May 9, Hujiao gapped higher and opened higher. On May 10th, Shanghai Hujiao continued its upward trend in the morning session, with the highest rise to 11,820 points. However, natural rubber fundamentals lacked effective support, and the midday price fell back and some of the gains were withdrawn. The final Hujiao main 1809 contract closed at 11680 points, up 70 points over the previous trading day, or 0.60%.

Since late April, there have been three relatively significant rebounds in rubber futures, including a maximum of 11920 on May 7, but it failed to reach the level of the 2002 deadline. In the short term, the above 40-day moving average, the Chelsea upper rail, the Bollinger upper rail, and the previous highs, ie the 11800-11950 range, are still heavier for the market.

The rebound of rubber futures is hindered by the repression of fundamentals. Despite the continuous rise in international oil prices, Lido Chemicals Market and the domestic natural rubber market have accelerated the destocking of rubber in Qingdao Free Trade Zone from March to April, providing support for the market. However, the fundamental pressure of natural rubber spot market still exists, and it is difficult to break the weak situation. In the short to medium term, the natural rubber spot market pressures are as follows:

First, it is expected that the supply of new rubber will increase. In the off-season of rubber production and the impact of export restrictions imposed by the main producing country, China’s natural rubber imports fell from the second consecutive month to the third consecutive month. The opening of domestic and foreign production areas, it is reported that the rubber tree has a good uptrend. Under the influence of no bad weather, the glue production gradually increased. The number of new arrivals in Hong Kong is expected to increase in May. Merchants have begun to pre-sell the arrivals at the end of May and the end of the month.

Second, rubber stocks in the previous period were at a high level. As required by the previous period, since May 11 (Friday), the natural rubber warehouse receipts in the standard warehouse receipt management system that exceeded the expiration date of the warehouse were converted to cash. It was heard that some areas of the warehouse intended to adjust storage fees, will increase the pressure on business funds. The market’s demand for all-latex was sluggish, and traders were under pressure to ship. Delivery of the 1805 contract next week, concerned about changes in market sentiment.

Third, since late April, Hujiao’s main 1809 contract and the RMB spread have basically stabilized at 800~900 yuan/ton, and arbitrage has limited operating space. It is reported that the early stage arbitrage has not yet been released, the domestic mixed rubber stocks are still relatively large, the supply of standard plastics in Yunnan area is equally abundant, etc., and the potential inventory pressure in the domestic natural rubber market remains.

Fourth, the downstream demand market procurement is flat. The EU imposes anti-dumping duties on China’s truck and bus tyres, which will adversely affect the downstream rubber industry. Before and after the Shanghe Summit, factories in Qingdao and surrounding areas started to have different degrees of influence. When entering the northern region in June, the production of tires will gradually enter the off-season.

Only from the perspective of supply and demand fundamentals, May is not a good time for natural rubber market rebound. Although the short-term market gains more profits, the bottom of the price rises gradually, but the upper repression is strong, and there is no effective breakthrough in the market.

Translated by Google Translator from http://www.cria.org.cn/newsdetail/43612.html

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