Rubber Market: Short-term Price Trend

Market review: Due to weather disturbances, new rubber at home and abroad is released slowly, and raw material support still exists.

However, after the rainy weather ends, the overall pace of raw material volume will also be faster, and raw material prices are still expected to fall, and cost support is significantly weakened.

There has been no significant improvement on the demand side, and the upward drive of rubber prices is limited, but the macro-external sentiment has improved recently, and it is expected that rubber prices will be consolidated in a narrow range in the short term.

Cost side: Weather still has disturbances and raw material prices are still supported

There is a lot of rain in Thailand, and the output of new rubber has not increased significantly. Northeast Thailand is basically close to full harvesting, and southern Thailand is 50-60% of the start-up; Vietnam's production areas are basically fully harvested and gradually transition to the seasonal increment stage. Affected by the decline in the spot market during the week, the purchase price of raw materials has weakened, but the range is limited.

Weather disturbances in the Yunnan production area still exist, affecting the rubber tapping process in some areas, but the overall raw material volume has increased slightly month-on-month, and the phenomenon of processing plants rushing to harvest raw materials still exists.

Affected by the decline in the current market, the center of gravity of the purchase price of raw materials continues to weaken. The weather in Hainan production area has improved, rubber tapping and raw material output have gradually resumed, and the daily rubber harvesting volume of the whole island is roughly around 2,500 tons. Due to concerns about typhoon weather in the next few days, some processing plants are eager to grab glue.

Overall, the phenological conditions in the main natural rubber producing areas of the world are relatively normal so far, and the tapping process in domestic and foreign production areas is relatively smooth.

However, the rainy season in the production areas came relatively early this year, and the rainfall disturbance was large at the beginning of tapping, which affected the overall volume.

However, the rainfall was abundant in April and May, which was conducive to the release of raw materials in the future market to a certain extent.

Demand side: actual sales growth rate is limited, and enterprises still have production control

Recently, as the weather gradually warms up, the terminal replacement demand for all-steel tires has increased slightly, which is beneficial to the domestic replacement market demand to a certain extent. However, with the restriction of traffic in some areas during the college entrance examination, the overall replacement demand has increased limitedly, and the market is mainly focused on digesting the previous inventory.

Semi-steel tire companies continue to follow up on their pricing policies, but the overall market trading has not seen a significant increase. However, supported by foreign trade snow tire orders and export volumes in some regions, the overall production of companies still has some support, but in order to control inventory increases, companies continue to flexibly control production, and there are still signs of suspension and reduction of production.

Overall, the order performance of tire companies is quite differentiated, and the performance of some large companies is basically stable. Affected by the differentiation of export locations, the performance of foreign trade orders of companies varies. Overall, the market terminal demand is weak and the channel inventory is sufficient.

Inventory: The destocking trend may continue

After the Dragon Boat Festival, most tire sample companies basically digested the previous inventory, and only a few tire companies made small purchases during the week, and the overall inventory days of tire companies decreased slightly. In the next three months, domestic and foreign production areas will enter the stage of full harvesting, and new rubber will gradually increase.

It is expected that the supply and demand of natural rubber will increase, and the natural rubber inventory may maintain a slow destocking trend and low inventory, which will support the bottom of rubber prices to a certain extent.

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