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Thursday, March 30, 2023

Can rubber come back to the 12000 8 year down road?

After nearly four months, rubber finally stood on 12000 again. After the Spring Festival, rubber futures ushered in a wave of rising, very eye-catching. On the 18th, the opening of the night plate broke the platform and took the 12000 mark within 2 minutes. As of the close of the afternoon of the 19th, the main contract 1905 closed at 12,375 yuan / ton, up 8.36% from the pre-holiday closing price, only a one-day increase of nearly 5% on the 19th.

Stop production in the production area, boosting the price of rubber

The pressure on the rubber supply side has always been the main contradiction of the low price of rubber. The so-called ringing of the bell has to be tied to the bell. This time, the rebound has rebounded and the supply pressure has temporarily eased.

Due to the time limit of natural rubber production per year, the supply of natural rubber will be seasonal. The rubber cutting period of Thailand, Indonesia and Malaysia, the main natural rubber producing countries, is generally from April to February. That is to say, after entering February, the main producing countries of Southeast Asia began to gradually enter a comprehensive period of suspension. Domestically, natural rubber production areas include Hainan, Yunnan, Guangdong, Guangxi, etc., mainly in Hainan and Yunnan provinces. Under normal circumstances, Hainan tapping season from late March to late December, Yunnan from April to November each year. Therefore, the domestic current is also in the period of suspension.

Stopping cuts means that supply is reduced, and there is a certain positive in terms of boosting prices. In addition, after the rubber is cut, it usually takes a month to be listed. Therefore, the substantial increase in natural rubber production will basically wait until after May. Although Hainan’s opening period is relatively early, domestic production has limited impact on rubber prices. This means that global natural rubber production is at its lowest level during the period from February to May.

Through analysis of historical trends, it is generally reported that rubber prices have a higher probability of rising in the first half of the year, and began to turn weaker in June and July, and then entered a round of gains after entering December. This trend characteristic is basically consistent with the rubber’s stop-cut time. The trend of rubber in 2018 also basically follows this rule.

Although natural rubber international and domestic major producing areas have entered a low-yield period, rubber stocks with high and slow digestion are still a major drag on the supply side, or will limit the increase in rubber prices.

Major producing countries cut export plans to stimulate rubber price rebound

Last week, a senior official of the Indonesian Ministry of Trade told reporters that Indonesia will propose an agreed export tonnage plan (AETS) at the meeting of the three major rubber producing countries, hoping to reduce the export volume by 300,000 tons on the existing basis. To stabilize international rubber price fluctuations. The current situation is that Indonesia and Malaysia have exchanged views on the reduction of export quotas and basically agreed to implement the reduction plan. However, the Thai side has not yet expressed its position on whether to join the action plan.

Oversupply is considered to be the key reason for the continued sluggish international rubber prices. If the reduction in export volume can boost the price of rubber, the Thai side will certainly consider it positively. But reducing exports means that the government needs to increase the amount of stocks, which will put pressure on the government’s finances and will affect whether the agreement is reached or not. In addition, the low price of rubber has been going on for many years. If the price of rubber has not improved after the export is reduced, the practice of reducing exports may not be sustainable.

It is understood that the International Tripartite Rubber Council (ITRC), consisting of Indonesia, Malaysia and Thailand, will meet in Bangkok from February 21st to 22nd, and will be concerned about the situation.

The demand side is still unclear

In addition to the favorable factors at the supply end, with the end of the Spring Festival, the expectation that the downstream enterprises’ operating rate will gradually recover will also support the price. As far as last week’s situation is concerned, the downstream return to work is not ideal. Therefore, after the Lantern Festival, whether it can accelerate the start of construction as expected requires attention. In addition, under the expected economic downturn, the downstream automobile consumption demand is still not optimistic.

According to the statistical analysis of the China Association of Automobile Manufacturers, in January 2019, the production and sales of the entire automobile decreased compared with the previous month, and the decline of commercial vehicles was particularly obvious. In January, the production of commercial vehicles was 370,000 units, down 13.4% from the previous month, with sales of 346,000 units, down 19.2% from the previous month. The sales volume of passenger vehicles was 2.021 million units, down 17.71% year-on-year, with a negative growth for 7 consecutive months, the largest decline in 7 years.

However, the heavy-duty truck sales, which are closely related to the price of rubber, were slightly above market expectations. According to the data of the first commercial vehicle network, the sales of heavy trucks in January were 96,000, which was +16% from the previous month, which was the second highest point in the history of January. In the context of the blue sky defense war continues to advance, the replacement of heavy trucks will accelerate. Some institutions expect that the sales of heavy trucks in 19 years will remain optimistic, and sales will remain above 1 million.

The International Rubber Research Group (IRSG) also predicted that global rubber demand will increase by about 2.5% to more than 30 million tons in 2019. Among them, the demand for natural rubber will increase to 14.2 million tons, and the demand for synthetic rubber will increase to 15.8 million tons.

Rubber price fell 70% in eight years

Since the rubber futures index fell from the high of 43293 in 2011, it has been more than eight years (5+1+2). Based on today’s closing price, it has fallen by more than 70%. During the period, there was only a one-year short-term rebound, and the rebound did not reach half of the decline, and then it fell for two years. At the same time, Thai rubber prices hit a high price of 137.94 baht / kg in 2011, but then fell all the way, and fell to 42.38 baht / kg in 2018.

The price of rubber, which has been falling, has severely frustrated market confidence. If the fundamentals are not substantially improved, it is difficult for the rubber price to regain its glory in a short period of time.

Translated by Google Translator from http://www.cria.org.cn/newsdetail/47689.html

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