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There is a significant improvement in the end market of natural rubber prices will be repaired
I. Market Review
In May, the main contract futures price of gum came out of the situation of first up and then down. At the beginning of the month, under the fermentation of storage speculation and rainfall in the production area, the price of rubber opened a wave of repair. However, as the storage is only a market rumor, not implemented, coupled with the general downstream tire demand, domestic rubber stocks continue to be high, forming a suppression of the plate, rubber prices in the 12350 area to stop rising.
Into the middle and second half of May, the global macroeconomic situation is weak, the bulk of finished products under pressure down, coupled with the high level of domestic rubber social inventory suppression and demand-side recovery is poor, rubber prices all the way down. From the perspective of basis difference, it is currently in the seasonal basis difference expansion trend, and the subsequent basis difference is still expected to rise.
Second, June 2023 analysis of the supply and demand pattern of rubber
2.1 June global supply side of rubber is expected to rise sharply in accordance with the natural rubber cutting cycle, April in the global production of low production period, and after April, the global natural rubber from low production period to increase production transition. Into May, this year, the main domestic production areas by the weather disturbance, the opening of slightly delayed, resulting in the new glue on the amount of follow-up is insufficient, triggering light-colored rubber continued to reduce the warehouse.
From the perspective of the peripheral market, the weather conditions in the main production areas of Southeast Asia in May are still good, and the rubber cutting work is starting one after another, and the market supply continues to go up. In June, the domestic production areas cut rubber work is gradually fully carried out, coupled with the peripheral market supply continues to grow, the global supply side of the late pressure.
According to forecasts, global rubber production in 2023 is expected to increase by 2.7% year-on-year to 14.916 million tons, unchanged from the expected value in March. Among them, Thailand increased by 2.5%, Indonesia increased by 1.8%, China increased by 3.2%, India increased by 3.8%, Vietnam increased by 0.1%, Malaysia increased by 11.4%, and other countries increased by 2.8%.
2.2 Global demand in June to be further verified
In terms of consumption, according to the report, it is predicted that the global economic recovery will slow down in 2023 due to rising risks in global financial markets, interest rate hikes, and the Russia-Ukraine conflict. The global consumption of gum is expected to decline by 0.4% year-on-year to 14.912 million tons in 2023, unchanged from last month's forecast.
As of late May, the U.S. bipartisan for the government debt ceiling issue still has not reached agreement, with the deadline approaching, the market parties are more obvious risk aversion wait-and-see mood. From the Federal Reserve minutes of the May meeting, you can not rule out the possibility of continuing to raise interest rates next, the current Fed rate hike probability rose to near 40% in June, and the recent strengthening of the dollar index for commodity prices generally form a certain pressure. Coming into the off-season of the year for tires, in the context of increased macro risks, the subsequent actual demand for rubber is yet to be verified.
2.3 June domestic rubber stocks continue to hover at a high level
Domestic natural rubber social stocks reached a yearly high of 1.361 million tons in early May, after which they were disturbed by weather in the main producing areas of Yunnan, as well as a decline in the import of natural rubber after late April, leading to a slight decline in domestic natural rubber social stocks. According to statistics, in April, China's imports of natural rubber and synthetic rubber (including latex) reached 701,000 tons, although up 30.8% over the same period last year, but the month-on-month decline of 5.01%.
As of May 23, domestic natural rubber social inventory reached 1.352 million tons, down 0.66% from the peak in May. However, after the second half of May, the Yunnan production area will gradually start cutting, coupled with the successive arrival of imported supplies, the domestic market supply will remain high, especially the dark rubber to warehouse inflection point is unclear.
2.4 The tire market continues to recover the momentum is not enough
From the downstream tire market, the beginning of the year with the unsealing of the epidemic, tire industry demand gradually recovered. 2023 January-April China's tire outer tire cumulative output of 304.88 million, up 12.3% over the same period last year. April domestic rubber tire outer tire production of 85.269 million, up 31.3% over the same period last year, but due to the lack of sustained recovery, April's production than in March Slumped 6.16% year-on-year.
In April, the tire market did not continue the explosive growth, but ushered in a period of calm. May due to the actual progress of digestion of finished goods inventory is less than expected, resulting in the continued contraction of factory installation start-up rate. According to statistics, as of late May, the monthly average start rate of domestic semi-steel tires and all-steel tires was 63.76% and 70.85%, down 3.51 and 1.75 percentage points respectively from the average value of last month.
As of the end of the month, the finished goods inventory of semi- and all-steel tire enterprises in Shandong showed a sharp rise, both reaching the high point since the beginning of February. There is a certain negative feedback on the upstream rubber market procurement, which further suppresses the plate.
From the perspective of the export market, China's rubber tire exports in April this year totaled 730,000 tons, a 3.95% decrease from the previous year, but a 14% year-on-year increase, which still remains at a high level. The current global macro situation is relatively weak, the positive support of the export market has yet to be verified.
Third, the market outlook
Through the analysis of rubber fundamentals, we believe that in June the global supply will be in the transition from low to high production, production or there is a significant seasonal rise, especially in Yunnan natural rubber production areas gradually resume cutting, coupled with the successive arrival of imported goods, the domestic rubber inventory from the previous small to warehouse or will turn into a cumulative warehouse situation.
From the demand side, after a hot start in the first quarter, the tire market in April ushered in a period of calm, due to the actual digestion of finished goods inventory progress is less than expected, April half steel tires and all-steel tires will gradually enter a continuous accumulation, as of the end of May inventory reached a high point since early February.
In May, the main contract futures price of gum came out of the situation of first up and then down. At the beginning of the month, under the fermentation of storage speculation and rainfall in the production area, the price of rubber opened a wave of repair. However, as the storage is only a market rumor, not implemented, coupled with the general downstream tire demand, domestic rubber stocks continue to be high, forming a suppression of the plate, rubber prices in the 12350 area to stop rising.
Into the middle and second half of May, the global macroeconomic situation is weak, the bulk of finished products under pressure down, coupled with the high level of domestic rubber social inventory suppression and demand-side recovery is poor, rubber prices all the way down. From the perspective of basis difference, it is currently in the seasonal basis difference expansion trend, and the subsequent basis difference is still expected to rise.
Second, June 2023 analysis of the supply and demand pattern of rubber
2.1 June global supply side of rubber is expected to rise sharply in accordance with the natural rubber cutting cycle, April in the global production of low production period, and after April, the global natural rubber from low production period to increase production transition. Into May, this year, the main domestic production areas by the weather disturbance, the opening of slightly delayed, resulting in the new glue on the amount of follow-up is insufficient, triggering light-colored rubber continued to reduce the warehouse.
From the perspective of the peripheral market, the weather conditions in the main production areas of Southeast Asia in May are still good, and the rubber cutting work is starting one after another, and the market supply continues to go up. In June, the domestic production areas cut rubber work is gradually fully carried out, coupled with the peripheral market supply continues to grow, the global supply side of the late pressure.
According to forecasts, global rubber production in 2023 is expected to increase by 2.7% year-on-year to 14.916 million tons, unchanged from the expected value in March. Among them, Thailand increased by 2.5%, Indonesia increased by 1.8%, China increased by 3.2%, India increased by 3.8%, Vietnam increased by 0.1%, Malaysia increased by 11.4%, and other countries increased by 2.8%.
2.2 Global demand in June to be further verified
In terms of consumption, according to the report, it is predicted that the global economic recovery will slow down in 2023 due to rising risks in global financial markets, interest rate hikes, and the Russia-Ukraine conflict. The global consumption of gum is expected to decline by 0.4% year-on-year to 14.912 million tons in 2023, unchanged from last month's forecast.
As of late May, the U.S. bipartisan for the government debt ceiling issue still has not reached agreement, with the deadline approaching, the market parties are more obvious risk aversion wait-and-see mood. From the Federal Reserve minutes of the May meeting, you can not rule out the possibility of continuing to raise interest rates next, the current Fed rate hike probability rose to near 40% in June, and the recent strengthening of the dollar index for commodity prices generally form a certain pressure. Coming into the off-season of the year for tires, in the context of increased macro risks, the subsequent actual demand for rubber is yet to be verified.
2.3 June domestic rubber stocks continue to hover at a high level
Domestic natural rubber social stocks reached a yearly high of 1.361 million tons in early May, after which they were disturbed by weather in the main producing areas of Yunnan, as well as a decline in the import of natural rubber after late April, leading to a slight decline in domestic natural rubber social stocks. According to statistics, in April, China's imports of natural rubber and synthetic rubber (including latex) reached 701,000 tons, although up 30.8% over the same period last year, but the month-on-month decline of 5.01%.
As of May 23, domestic natural rubber social inventory reached 1.352 million tons, down 0.66% from the peak in May. However, after the second half of May, the Yunnan production area will gradually start cutting, coupled with the successive arrival of imported supplies, the domestic market supply will remain high, especially the dark rubber to warehouse inflection point is unclear.
2.4 The tire market continues to recover the momentum is not enough
From the downstream tire market, the beginning of the year with the unsealing of the epidemic, tire industry demand gradually recovered. 2023 January-April China's tire outer tire cumulative output of 304.88 million, up 12.3% over the same period last year. April domestic rubber tire outer tire production of 85.269 million, up 31.3% over the same period last year, but due to the lack of sustained recovery, April's production than in March Slumped 6.16% year-on-year.
In April, the tire market did not continue the explosive growth, but ushered in a period of calm. May due to the actual progress of digestion of finished goods inventory is less than expected, resulting in the continued contraction of factory installation start-up rate. According to statistics, as of late May, the monthly average start rate of domestic semi-steel tires and all-steel tires was 63.76% and 70.85%, down 3.51 and 1.75 percentage points respectively from the average value of last month.
As of the end of the month, the finished goods inventory of semi- and all-steel tire enterprises in Shandong showed a sharp rise, both reaching the high point since the beginning of February. There is a certain negative feedback on the upstream rubber market procurement, which further suppresses the plate.
From the perspective of the export market, China's rubber tire exports in April this year totaled 730,000 tons, a 3.95% decrease from the previous year, but a 14% year-on-year increase, which still remains at a high level. The current global macro situation is relatively weak, the positive support of the export market has yet to be verified.
Third, the market outlook
Through the analysis of rubber fundamentals, we believe that in June the global supply will be in the transition from low to high production, production or there is a significant seasonal rise, especially in Yunnan natural rubber production areas gradually resume cutting, coupled with the successive arrival of imported goods, the domestic rubber inventory from the previous small to warehouse or will turn into a cumulative warehouse situation.
From the demand side, after a hot start in the first quarter, the tire market in April ushered in a period of calm, due to the actual digestion of finished goods inventory progress is less than expected, April half steel tires and all-steel tires will gradually enter a continuous accumulation, as of the end of May inventory reached a high point since early February.
Coupled with the current global economic situation is still not optimistic, the actual demand of the end market is yet to be verified. Therefore, we believe that in June, the probability of low oscillation of rubber is likely to continue, unless there is a significant improvement in the downstream and terminal market, the price will usher in a wave of repair, otherwise the probability of continued low oscillation is high, cautious operation.
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