After the Spring Festival holiday, driven by the resonance of macro and fundamental aspects, domestic rubber futures rose strongly as a whole. No. 20 rubber futures kept breaking the high level since its listing, and Shanghai rubber also continued to break through the previous high. However, on the last trading day of last week, under the influence of the abrupt fall of the market atmosphere, the price of double glue rose sharply in the early stage. In the face of the future, can the rubber price regain its upward trend? How to deal with the risk of price fluctuation when enterprises start after the festival? Futures Daily reporter interviewed relevant professionals for this.
Resonance between macro surface and fundamental surface
In the view of analysts, the continuous rise of rubber prices after the Spring Festival is mainly the result of the joint promotion of the macro warm atmosphere and the strong fundamentals of rubber itself. From the fundamental point of view, Guotai Junan Futures analyst Gao Linlin told reporters that at present, the rubber production end is approaching the full stop cutting period, China, Vietnam and some parts of Thailand have stopped cutting, and the supply of Southeast Asia is showing a seasonal decline, which is directly reflected in the rising price of raw materials in Thailand and the substantial increase of glue price. At the same time, Thailand’s export volume to China in January decreased year-on-year and month on month, which also eased the pressure of arrival and accumulation. It can be said that the current supply side pressure and raw material price support for the formation of positive disk.
On the demand side, Zhu ziyue, an analyst at Hongyuan futures, said that the holiday time of domestic tire factories this Spring Festival is 4-5 days less than that in previous years, and the early start of work has formed a support for short-term demand. At the same time, Gao Linlin said that there is a seasonal recovery in rubber demand after the Spring Festival, and the operating rate of domestic tire enterprises is expected to pick up. From all kinds of data, domestic terminal automobile sales still maintain a high growth rate.
On the macro level, Gao Linlin said that due to various kinds of economic stimulus policies and monetary easing in overseas markets, the bull market pattern of bulk commodities was also promoted under the liquidity feast, which was reflected in the continuous rise of such landmark varieties as crude oil and copper after the festival. As Shanghai rubber has been washing the plate and grinding the bottom in the early stage, there is a demand to make up for this round of increase.
“At the same time, it can be seen that last Friday, rubber prices rose and then fell, which was also affected by the overall commodity market sentiment. The soaring yield of U.S. 10-year Treasury bonds led to the decline of global risk assets. After superimposing the market high, profits were taken. U.S. stocks, a shares, crude oil, copper, etc. all started to callback, which also formed a drag on rubber prices.” Zhu ziyue said.
In Zhu ziyue’s view, there are several core factors worthy of attention. First of all, with the stoppage of cutting in Tainan in March, we need to pay attention to Yunnan cutting and domestic warehouse receipts. On the one hand, Yunnan may be cut in late March or early April. This year, Yunnan has complete fallen leaves and regular buds. The weather conditions from February to March may easily lead to the epidemic of powdery mildew, or may affect the tapping of rubber trees. At the same time, the current price is at a high level since 2017. It is estimated that the price of raw materials in Yunnan may be 14000-15000 yuan / ton, and the delivery profit is expected to be at least 1000 yuan / ton. The high profit will stimulate production. On the other hand, considering the low output in the early stage of Yunnan’s cutting, it is estimated that the quantity of warehouse receipts will remain low before the end of March, which will support the price. However, since April, if the delivery starts, the price will increase The profit will continue to improve, and the weather is good. It is expected that the accumulation of warehouse receipts will gradually accelerate. Secondly, she said that it is difficult to increase the stock of light color glue during the stop cutting period, switch between the strength of standard glue and mixed glue, and speed up the stock of dark color glue. Meanwhile, in January, Thailand’s export growth rate of standard rubber continued to recover, while the export growth rate of mixed rubber significantly weakened, indicating the recovery of overseas demand. Thailand’s production capacity may continue to tilt towards standard rubber, which will help to digest domestic mixed rubber inventory. In addition, the price difference between dark and light colored glue in the superimposed upward trend is expanding, and the arbitrage order has limited space to add positions, so it is expected that the inventory outside the region will continue to be removed. Finally, we need to pay attention to the downstream procurement. “According to our research, the raw materials and finished products of downstream manufacturing enterprises such as tires and conveyor belts are abundant, and the inventory of foaming plants is about 2-4 weeks. In the short term, it is difficult to increase the purchase of raw materials rapidly. We should pay attention to the acceptance of high prices by downstream manufacturers and the influence of buying up but not buying down.” Zhu ziyue said.
The upward path of rubber price may not be smooth
Gao Linlin said that under the inflation expectation and cycle start expectation, the commodity market rose in the early stage, but the style will be differentiated in the later stage. Shanghai Rubber Co., Ltd. is a late rising variety, and its own fundamentals do not support its trend rising. “At present, from the perspective of rubber fundamentals, due to the influence of weather, diseases and concentrated milk diversion in 2021, the low production of disk delivery products is still expected, but the global rubber production and demand may increase at the same time under the low base last year, so the global rubber supply and demand is not enough to trigger a trend market.” She explained.
“However, considering the domestic situation, the periodic market caused by tight supply or capital is still expected.” She said that rubber belongs to the “supply outside, demand inside” variety. The rapid recovery of domestic demand in the stabilization of the epidemic situation and the rebound of terminal consumption in the peripheral market after the inflection point of the epidemic situation will provide support for HuJiao to stabilize from the bottom and get out of the depression. There is still room and imagination for overseas demand to recover. As for whether the inner rubber can continue to strengthen, the focus also depends on the demand increment and the supply situation in the new cutting season.
Overall, Gao Linlin believes that the safety margin of rubber long is high, and the high market will continue. In the short term, let’s see whether the 18000 yuan / ton point can form a breakthrough. If it can effectively break through, then the rising space will continue to open. From the time dimension, this wave of rapid inflation can be seen in the middle and late March. However, if we can not effectively break through this point, the price of rubber may weaken later. From the perspective of raw material growth, supply and demand of market segments and inventory, the support of Shanghai rubber is still stronger than that of No. 20 rubber. However, due to the better liquidity of Shanghai rubber, No. 20 rubber may show higher volatility and flexibility under the influence of capital sentiment.
Zhu ziyue believes that the short-term rubber market may continue to run stronger, but with the market entering a high level, the range game is expected to intensify, and the rubber price may fluctuate in the range of 16000-17500 yuan / ton. In the medium term, this round of strength may continue to the middle of the second quarter. When the demand recovery is expected to be realized, the rubber price is expected to fall. At that time, we will see the futures price difference and the deep and light color price difference fall.
“We can see that since last year, the trend of different rubber varieties has been seriously differentiated, and the price difference between varieties is extremely huge.” Hu Huaqiao, an analyst of Guotou Anxin futures, believes that the continuation of the high market in the later period depends on fundamental changes and price levels. Among them, the price of cigarette glue is the strongest and the valuation is the most expensive; the price of all latex is the second strongest and the valuation is the second most expensive; the price of standard glue is average and the valuation is reasonable; the price of mixed glue is the weakest and the valuation is low. Overall, he said, the natural rubber market has gradually changed from a weak supply and demand to a double increase in supply and demand. The recovery rhythm of domestic and foreign markets is mismatched, and the epidemic situation has led to serious price differentiation among varieties. It is expected that varieties with overestimated prices such as tobacco leaf rubber will return, and varieties with underestimated prices such as standard rubber will be repaired.
Tong Changzheng, Rubber Researcher of chaos Tiancheng futures, believes that overall, the current supply and demand of rubber is still in a relatively balanced state, and the situation of short supply does not appear. At the same time, the rising price of rubber will stimulate more tapping of rubber trees, thus reversing the pattern of supply and demand. However, he believes that the current rubber rally is still sustainable, but the bull market is not solid, so it is inevitable to stumble in the process of rising. He suggested that investors should be long on bargain hunting, pay attention to control their positions and guard against the risk of short-term withdrawal of rubber prices.
Enterprises use derivatives to avoid risks
For the industrial chain, Gao Linlin said that when the cost price of the upstream can be smoothly transmitted to the downstream, the story of the prosperity of the industrial chain can be staged. Once the cost price of the downstream cannot be transmitted, and the operators encounter sales difficulties, they will stop issuing orders to the upstream, so the high cost price of the upstream naturally becomes the source of no cost. Therefore, it is very necessary for the middle and downstream enterprises with the demand of raw material procurement to buy hedging. By using the futures market to establish virtual inventory, locking the cost of raw materials in advance and the terminal sales profit, we can smooth the income curve and escort the production and operation of enterprises. “In fact, we also see that after this wave of rising raw materials, more and more entity enterprises and listed companies participate in the team of futures hedging, and use new derivatives to control production costs, which has achieved good results.”
Looking forward to the future, Zhu ziyue said that the current rubber price is at a historical high in the past three years, which will stimulate the enthusiasm of rubber farmers to cut rubber. As long as the weather is good in the later stage, the output is expected to increase, which will suppress the rubber price in the second half of the year. Therefore, it is suggested that upstream enterprises should consider placing empty orders in 2109 contracts at the end of the second quarter to do a good job in hedging; for downstream enterprises, she said that the current raw material inventory of enterprises is still abundant, but considering that the current rubber price remains strong, and with the easing of the shortage of export containers, the export demand is expected to recover. Therefore, it is suggested that the downstream enterprises can purchase part of the far month goods, or use derivatives such as options to reduce the procurement cost.
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