Metallurgy / Chemicals / Rubber & Plastics

In the early review on July 19, our recommendation changed from being appropriately optimistic to being appropriately cautious, from looking for long opportunities to temporarily waiting and watching. The reason we give is the risk of US stocks and crude oil.

In the night trading on July 19, rubber plummeted nearly 5%, and the Nasdaq plummeted because crude oil plummeted more than 4%. We once again accurately warned. Because we communicated with some top institutions, we realized that the macro risk of the decline in crude oil and U.S. stocks should not be ignored, thus increasing the probability that the forecast is correct. But why is it July 19th? We attribute it to our comprehensive judgment (abbreviated as guessing + coincidentally wrong). Our view remains unchanged. If RU2109 is below 13000, we are not pessimistic about rubber prices. At present, we still think we need to be cautious, but the local buying point can definitely be closer. The sales peak of the National Sixth Standard is about to pass, and the future demand for heavy truck tires is expected to weaken slightly. After June, as the peak season for rubber supply in Thailand begins, supply pressure is expected to increase.

At present, domestic rubber maintains a relatively high inventory of close to 800,000 tons, and tire factory inventory has increased, and operating rates have fallen. It is expected that rubber prices will fluctuate in the later period. But when the absolute price is not high, how can the market rebound easily? The boom has recovered. As of July 16, 2021, (exchange rubber and No. 20 rubber, plus Qingdao rubber) inventory (10,000 tons) 76.04 (-0.52). Due to the low production level caused by the festivals and low demand in the first two weeks, this week has recovered. The start of construction has increased significantly. As of July 16, 2021, the starting load of all-steel tires for tire companies in Shandong was 59.85%, an increase of 17.58 percentage points from last week, a decrease of 8.98 percentage points from the same period last year, and a decrease of 15.09 percentage points from the same period in 2019. The domestic tire company's semi-steel tire operating load was 56.38%, 11.37 percentage points higher than last week, 8.36 percentage points lower than the same period last year, and 14.83 percentage points lower than the same period in 2019. Domestic demand is weak, export space is tight, and tire export pressure is relatively high. Manufacturers' shipments are difficult to pick up, and domestic all-steel tire market demand is not performing well. Due to poor freight, low freight, and lack of supply, the demand for replacement tires is relatively weak. At present, the impact of tight export space and high sea freight rates will continue, the export delivery cycle will be extended, and the pressure of export stagnation will continue. Therefore, the expected subsequent operating rate is also difficult to exceed expectations.

The spot price of compound rubber in the spot market was 12,100 (-50) yuan at 16:00-18:00 in the afternoon of the last trading day. The standard rubber spot is 1,650 (-15) dollars.

Operational recommendations: We judge that the price of rubber will fluctuate in the mid-term. Our current recommendation is for conservatives to wait and see for the time being, and activists to wait and see for the time being. It is estimated that the market is volatile at a low level. If you don't care about liquidity, choose NR for longer. Although the liquidity of RU is good, the premium is high. The risk of US stocks has not been released, and crude oil has risen too much. If it pulls back, it will drive down the risk sentiment. Caution and risk control are important.