According to the data from the previous stock exchange, from the beginning of March to now, Shanghai Rubber has continued to fluctuate and decline, with the main contract falling from about 12500 yuan/ton at the beginning of the month to about 11550 yuan/ton, with a range of 7.6%. Among them, on the 16th, it fell by more than 400 points on a single day, making it the largest single day decline so far this month. According to the data from the Business News Agency, the spot market of natural rubber in China has been fluctuating in tandem with the futures trend. As of March 17, 2023, the domestic full latex market in East China was 11330 yuan/ton, down 5.5% month on month and 11.35% year on year.
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Moreover, as can be seen from Figure 2 and Figure 3, the current price level is not only the lowest level since 2023, but also the lowest level in the domestic natural rubber market since Tianjiao reached its annual low of 11170 yuan/ton on October 31, 2022.
Influencing factors:
Large increase in imports in the early stage
According to the data released by the General Administration of Customs of China on March 7th, China’s imports of natural and synthetic rubber (including latex) increased significantly from January to February 2023, compared to 1193000 tons in the same period of 2022. The significant increase in import volume in the previous two months has offset the positive supply side shortage, and currently, the import of rubber from major domestic ports is still continuing to arrive.
Current inventory accumulation
Affected by the continuous arrival of imported glue at the port, China’s bonded port areas and social areas have continued to accumulate stock of spot glue. According to data, as of March 5, 2023, the total inventory of Tianjiao Bonded and General Trade in Qingdao was 594900 tons, an increase of 16200 tons compared to the previous period, with a year-on-year increase of 2.81%. The bonded area inventory increased by 2.89% to 107300 tons on a month-on-month basis, while general trade inventory increased by 2.79% to 487600 tons on a month-on-month basis. It is understood that the current market is slowly digesting, with poor circulation, and a continuous accumulation of natural rubber, resulting in an oversupply of natural rubber.
Impact of crude oil slump
As the most fundamental source of chemicals, the trend of crude oil is the most direct macro influencing factor for the rise and fall of futures commodities. On March 15th, due to the impact of credit Suisse’s unease on the financial market, causing pressure on risky assets such as stock market and crude oil, and the negative impact of US crude oil inventory growth exceeding expectations, international crude oil futures plummeted: WTI fell 5.2%; Brent fell 4.9%. Affected by this, on the 16th, most futures varieties in the domestic futures market fell, resulting in a strong bearish atmosphere; The main contract of Shanghai Rubber fell by more than 400 points on a single day, and the domestic spot rubber price fell along with the market, making the market increasingly cautious in investing in natural rubber.
Future Forecast:
In terms of annual comparison, in the first quarter of 2023, natural rubber did not break out of the sharp rise in the traditional annual low production period. Instead, after a sharp decline in early February, it continued to fluctuate slightly and fell to this point, with a significant overall decline. In 2022, the natural rubber market in the same period was affected by public health events, resulting in limited circulation in consumption areas and reduced downstream demand.
In terms of supply, although natural rubber is currently in the global seasonal annual low production period, a small amount of production will be started in eastern and southeastern Yunnan as soon as the end of this month, and Hainan will also start production in the middle of next month. The market is concerned about the market changes caused by the current demand situation and the further increase in supply in the future, with strong bearish sentiment.
On the downstream side, although domestic rubber product companies have slowly recovered since the middle of last month, and there has been an upward trend in heavy truck sales data, the actual procurement demand of downstream product companies has not significantly improved, and the market supply and demand situation is still dominated by more supply and less demand, which is still a negative trend.
It is expected that under the influence of the current macro situation, the future market of natural rubber is not very optimistic. At the end of the first quarter, the market will still be shrouded in a strong bearish atmosphere in the investment market, and weak downstream demand will still lead to a lack of substantive support for the upward trend of the natural rubber market. The market panic caused by excessive decline in rubber futures needs time to digest; In the second quarter, the poor demand situation at home and abroad is expected to continue for a long time. As a major importer, China will continue to reduce its spot rubber orders to major Southeast Asian producers due to the high spot rubber inventory, and the prices of Thailand and Malaysia latex are expected to continue to suffer from significant downward risks; China’s downstream product enterprises have finished products in stock, and the wait-and-see mood is heating up. The market may continue to be weak.
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