Hujiao continued to decline in March, and the main contract once fell below the 10,000 mark. The recent spread of the international new coronavirus epidemic is still the most negative factor. According to rumors, the closure rate of North American auto factories has reached 80%, but the situation in Europe and Asia is not optimistic. Domestic auto companies have resumed work well, and downstream consumption has also recovered. However, due to the suspension of foreign auto companies, domestic tire exports were blocked. The dependence of China’s tire export is about 40%. Analysts estimate that tire export orders in the second quarter will fall by 20% -50%. The cutting of new rubber has been delayed due to the drought in the production area, but the weak downstream consumption has not reduced the pressure on natural rubber stocks. However, the management has repeatedly issued economic stimulus policies, and the situation of automobile consumption will gradually improve. On the whole, Hujiao is still in shock recently, and downstream companies of rubber (10060, -10.00, -0.10%) can reduce purchase costs by selling put options. Traders should pay attention to controlling the size of inventories, which can be near the technical rebound resistance level. Selling call options raises the selling price.
1. Market Summary
In June, Shanghai Jiaozhou shocked down, and the main contract fell below the 10,000 mark. Despite the continuous resumption of domestic enterprises, the spread of foreign epidemics has caused many automobile companies to temporarily shut down, and the deep decline in international crude oil prices has put tremendous pressure on the market. The Ministry of Commerce of China calls on local governments to stimulate automobile consumption, and some places give certain subsidies for scrapped old cars and new car purchases, increasing the number of indicators in areas where purchases are restricted. In addition, monetary policy stimulus such as the central bank’s RRR cut also supports the auto industry. Weak demand continues to weigh heavily on rubber prices. Although the demand for medical gloves has soared recently, its proportion in the total amount of rubber products is limited after all. Only the recovery of automobile production and sales can play a substantial supporting role in improving the rubber demand situation.
Second, the supply of natural rubber
1. There are many uncertainties, and the prospect of opening in April is unknown
The Association of Natural Rubber Producing Countries (ANRPC) released its natural rubber trends and statistics on March 30, 2020. According to the preliminary estimates and predictions of various countries, by the first quarter of 2020, global natural rubber production will increase by 1.8% year-on-year. Production in the second quarter is expected to increase by 3.6% from the same period last year. However, the first quarter is the off-season of tapping, and many production areas have ceased to cut, and the impact of production increase or decrease is not significant. The cut will resume one after another in April, and weather factors will affect the production progress of natural rubber. For example, due to severe drought in Yunnan, China plans to postpone the cut for half a month. In addition, the current low rubber price may affect the willingness of rubber farmers to cut rubber.
In addition, the spread of the new foreign epidemic has partially hindered trade and transportation. The Malaysian government announced the implementation of a move control order nationwide. It is reported that four of the five largest natural rubber factories in Malaysia have been closed, and some companies have received government notice to work from home. The Port of Penang is declared closed and no longer accepts the transit of Thai goods. Affected by this, the goods in Tainan, Shadun, Trang and other places are temporarily unable to be shipped and are being urgently allocated to ports in Thailand. Thailand’s natural rubber factory is not affected, and workers can work normally. However, the reduction in Chinese demand has led to a decline in Thai exports. The slump in Indonesian rubber prices is the primary reason why rubber farmers are not enthusiastic about tapping. As for whether the epidemic will affect a new round of tapping, we still need to pay attention to the development in the next month. Generally, the major rubber-producing countries in Southeast Asia will be cut in April, but this year the climate of Thailand, Vietnam and other places is arid. If the cutting is smooth, the low rubber price will also cause the rubber farmers to be less motivated.
2. Domestic rubber imports increased by 5.03% year-on-year at the beginning of the year
According to the latest statistics from China Customs, from January to February 2020, China imported 840,200 tons of natural rubber (including latex and mixed rubber), an increase of 5.03% year-on-year. Due to the weak domestic downstream demand, it is rumored that the port once accumulated. According to statistics from analysis agencies, the total amount of natural rubber stocks in the Qingdao Free Trade Zone exceeded 750,000 tons at the end of March, about 50,000 tons higher than the highest value last year.
3. Demand for natural rubber
According to the analysis of the Association of Natural Rubber Producing Countries (ANRPC), in the first quarter of 2020, global natural rubber consumption fell by 19.6% year-on-year. It is expected that consumption in the second quarter will fall by 1.5% compared with the same period last year. Due to the spread of the new crown epidemic in the world, many automobile and tire production companies have temporarily stopped working, which has a significant impact on the demand for rubber.
According to the announcement of the China Automobile Association, in March, China’s automobile production and sales exceeded 1.4 million units, respectively reaching 1.422 million units and 1.43 million units, an increase of 399.2% and 361.4% sequentially; a year-on-year decrease of 44.5% and 43.3%, respectively. Narrow by 35.3 and 35.8 percentage points. From January to March, automobile production and sales were 3.474 million and 3.672 million, down 45.2% and 42.4% year-on-year.
In March 2020, China’s heavy-duty truck market sold 113,000 vehicles of various types, down 24% year-on-year. Although domestic heavy truck companies and parts enterprises have resumed work, the heavy truck supply chain has not basically recovered until mid-March, which has affected the production and sales of various enterprises in March to a certain extent. In addition, many heavy truck companies and parts companies in Hubei began large-scale resumption of work from mid-to-late March, and it will take time to fully exert their efforts.
From January to February 2020, China exported 270,000 tons of semi-steel tires, down 8.01% from the same period last year. During the same period, the export of all-steel tires was 376,000 tons, a year-on-year decrease of 16.81%. The operating rate of tire companies gradually recovered after the Spring Festival. The operating rates of domestic all-steel tires and semi-steel tires were 63.37% and 61.2% at the beginning of April, up about 15 percentage points from the beginning of March, but still lower than the same period last year 10 ~ 12 percentage points. Affected by the shutdown of foreign auto companies, domestic tire exports were blocked. China’s tire export dependence is about 40%, Zhuo Chuang Information estimates that tire export orders in the second quarter will decline by 20% -50%.
In January-February 2020, the total output of domestic rubber tire casings was 80.865 million, which was 27.2% lower than the official statistical correction data for the same period in 2019. Due to the recent obstruction of tire exports, related companies may increase competition in the domestic market. In this way, before the market demand fully recovers, the operating rate of tire companies may be difficult to continue to increase, and consumption of rubber is still relatively weak.
4. Spread analysis
1. Analysis of current price difference
The average price difference of the natural rubber spread in March remained at around 240 yuan, which was basically the same as that in February. The deep fall in futures prices after the Spring Festival caused the basis to converge significantly, and the current arbitrage space was basically lost. Natural rubber futures warehouse receipts have declined for the second year since 2019, and the cross-year contract spread is around 1,000 yuan, which is a low level in recent years.
2. Analysis of futures contract spreads
At present, Shanghai Jiao’s main contracts are 2005, 2009 and 2101 contracts, and the price difference between adjacent contracts is relatively low compared to previous years. Due to the impact of sudden public health incidents, the market is concerned about the continued weak demand for rubber throughout the year. The price difference between May and September contracts has been consolidated for two months in the range of 200-300 yuan. If foreign auto companies resume work as planned in mid-to-late April, The forward contract is expected to expand premiums. The spread between the 2009 and 2101 contracts is more than 1,000 yuan, and the large spread between forward contracts across the year still exists. In the long run, the future volatility may not be very large. You can refer to the performance of the 2001 and 1909 contracts last year.
3. Analysis of the price difference between No. 5 and No. 20 natural rubber
The March 5th and 20th rubber spot spreads fluctuated mainly between 1,000 and 1,650 yuan, while the spread between the two futures main contracts was 1,800 and 2,050 yuan. The fact that the spread of futures is higher than the spot has been in existence since the listing of No. 20 rubber futures last year. Due to the different delivery systems of the two, the spread of futures is more significant. At present, the spread between No. 5 and No. 20 rubber futures is at an intermediate level in history. If excessive convergence or expansion occurs, arbitrage of the spread regression can be carried out.
4. Analysis of the price difference between natural rubber and synthetic rubber
Since March, the price of natural rubber has increased compared with that of butadiene rubber. The deep decline in crude oil prices makes the trend of cis-butadiene rubber weaker. Although natural rubber is not optimistic, it is relatively stronger than cis-butadiene rubber. In the long run, the current price difference is only moderate, and it is not yet possible to predict a return in the short term.
V. Rubber options market
Hujiao has fallen to a historical low, and there are signs of stopping the decline. The downside is expected to be small, but there is also a lack of upside momentum in the short term. Consider selling put options with an important support level (such as 9000 yuan) as the strike price.
Translated by Google Translator from http://www.cria.org.cn/newsdetail/53980.html