Metallurgy / Chemicals / Rubber & Plastics

On the night of the 11th, Hujiao opened lower and moved lower, and the one-month rebound may come to an end. After May Day, Hujiao once surpassed 14,700 yuan. The progress of the new rubber market was not as expected, and the import of rubber was relatively small. More importantly, the loose monetary policy may continue to have a general bullish stimulus for commodities. However, the domestic tire terminal demand is relatively weak, the inventory pressure of manufacturers has increased, and the operating rate has declined. In addition, domestic automobile production has entered the traditional off-season, and the global automobile industry is increasingly affected by the "core shortage", and the prospects for natural rubber demand are not optimistic. In the next few months, the supply and demand side of natural rubber is expected to be negative, and there is greater uncertainty in the adjustment of the US loose monetary policy in the second half of the year. The overall performance of the rubber market will continue to be weak in the future. The main contract of Hujiao may drop to near the 13,000 yuan mark again to find support.

New rubber opening

Slower progress

The high price of natural rubber at the beginning of the year stimulated the willingness to open early in the production areas, but due to drought and powdery mildew, the Yunnan production area was only partially opened in early April. The original plan for full opening will be in early May, but now it may be postponed. Until late May. The southern region of the Hainan production area opened a small amount at the end of March, and gradually opened around mid-April. However, the glue is limited in the early stage of cutting, and the competition for the raw materials of latex is more serious. In the first ten days of April, the purchase price difference between thick milk and whole latex production glue was as high as 3,000 yuan and 4,000 yuan, and gradually converged after the second ten days of the month. The recent price difference was only 200 yuan. Since the beginning of May, private processing plants have gradually started, and the price of glue has rebounded, which has increased the production cost of natural rubber.

The area with the most serious occurrence of powdery mildew in Yunnan gum trees is in Mengla, Xishuangbanna, which is expected to affect 60% of the area and 50% of the impact on Jinghong. Banna natural rubber production accounts for about 70% of Yunnan's total, while the Banna rubber area is concentrated in Jinghong and Mengla. Powdery mildew is a common disease of rubber trees, but if the rubber farmers are negligent, it is easy to be infected. It will mainly cause the rubber trees to defoliate and re-grow leaves, which delays the time of rubber tapping. After the rainfall in April, it is expected to grow into new leaves in early May, and then the output of new rubber is expected to increase.

Since mid-April, foreign production areas in Vietnam and Thailand have been harvested one after another. At the beginning of this month, due to the impact of rainfall and the epidemic, Thailand's output was small, and the price of glue was slightly increased. In the medium and long term, the phenological conditions are relatively normal. Under the background of relatively high rubber prices in recent years, it is more likely that new rubber production will increase in the later period. However, the epidemic situation in Thailand has deteriorated. There have been more than 1,000 new cases every day for several consecutive days. Nearly 30 provinces have issued epidemic prevention orders to restrict residents from going out at will. The spread of the epidemic has also appeared in Vietnam and Malaysia, and personnel exchanges have been strictly controlled. In this case, it is not ruled out that the shortage of labor will slow down the progress of rubber tapping.

Imported glue quantity

Lower than expected

The domestic dependence on natural rubber imports is quite high, and, due to the large current price difference of natural natural rubber in China, non-standard arbitrage operations are prevailing. After entering 2021, Qingdao's general trade warehouse storage volume will continue to be lower than the same period of last year. On the one hand, domestic arbitrage companies have not yet made a large number of warehousing and warehouse operations. On the other hand, due to strong overseas demand, high premiums are not conducive to China's natural rubber imports. . China imported 711,000 tons of natural and synthetic rubber (including latex) in March, an increase of 18% year-on-year, but the initial value of imports in April was only 440,000 tons, a decrease of 20.32% from the previous month and an increase of 12.24% year-on-year, and the growth rate was slower than that in March. . The cumulative imports from January to April were 1.8395 million tons, a cumulative year-on-year increase of 7.16%, which was lower than the cumulative 8.0% year-on-year level from January to March. According to Longzhong Information, imported rubber arrived in Hong Kong in May, and the weakness even spread to June.

In addition to the slow launch of new rubber, the slower import speed is also conducive to the digestion of natural rubber stocks, which is relatively bullish for rubber price trends.

Downstream demand weakens

Bad glue price

In terms of demand, after the suspension of production and maintenance during the "May 1st" period, the operating rate of the semi-steel tire sample manufacturers in early May was 54.36%, down 15.70% month-on-month and up 26.70% year-on-year. The larger year-on-year increase was due to the lower base last year. The operating rate of all-steel tire sample manufacturers was 56.59%, a decrease of 18.19% month-on-month and a year-on-year decrease of 0.72%. The operating rates at the beginning of March were 72.24% for semi-steel tires and 76.83% for all-steel tires; at the beginning of April, it was 73.20% for semi-steel tires and 78.03% for all-steel tires. In contrast, the recent operating rate of production enterprises has dropped significantly compared with the previous two months.

Since April, the inventory of finished products of tire companies has increased, and the downstream dealers' warehouses are not willing to continue to take goods. These are all due to the weak terminal demand. Although some companies have recently introduced promotional policies, the effect is not obvious. In April, the auto dealer inventory warning index was 56.4%, an increase of 0.9 percentage points from the previous month and a slight decrease of 0.4 percentage points year-on-year. The inventory warning index was above the line of prosperity and decline, and the auto market was in a recession zone. According to past laws, the monthly domestic automobile production reached its peak in the first half of the year in March, and then declined month by month. It was mostly at the bottom in July, and then gradually recovered from August. Moreover, the implementation of the new exhaust emission standards began in July, and the sales of heavy trucks are expected to be difficult to maintain growth momentum thereafter. Therefore, the domestic natural rubber consumption situation in the next few months is not optimistic.

The international market is not optimistic. In April, sales of new cars in many European countries increased significantly year-on-year, but this was mainly due to the low base affected by the epidemic last year, which was still down by more than 10% compared with the same period in 2019. There will be a close relationship between auto consumption and the epidemic situation in the later period. In addition, since the beginning of the year, global auto manufacturers have faced chip shortages, and more and more auto companies have been forced to reduce or suspend production. Industry insiders believe that the challenges faced in the second quarter and the losses caused by reduced car production will exceed those in the first quarter. Moreover, the capacity constraints of in-vehicle chips may not be eased until the third quarter, but the problem of tight supply may continue until the end of 2022.

Hujiao's rebound meets resistance

Mainly short rallies in May

Since mid-April, Hujiao has rebounded. Technically, it has been repaired after the 4,000-point consecutive decline in February-April. The launch of new plastics in fundamentals is not as fast as expected, and the slowdown in rubber imports has a beneficial effect, especially in the loose market. Under the stimulus of the macroeconomic side, the general rise of commodities also promoted the price of rubber. At present, the price of Hujiao has returned to the finishing area from October last year to early February this year, and there is technical pressure near 14,800 yuan. Moreover, with the increase in the supply of new rubber, and the limited room for improvement in downstream demand in the near future, and the macro-level uncertainty, Hujiao may still fall. The previous low of 13,300 yuan may still be tested, and it is recommended to go short on rallies in May.