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SunSirs: Agriculture, 2019 Natural Rubber Yearly Report

December 26 2019 13:57:08     SunSirs (Daisy)

1. Price Trend

In the past, the price of natural rubber even reached to 40,000 RMB/ton. However, the price of it has fallen by three-quarters. And price swings around 10,000 RMB/ton to 12,200 RMB/ton for more than half year.

In 2019, the price of natural rubber surged three times.  

The first time surge: 12,070 RMB/ton on March 4

The second time surge: 12,020 RMB/ton on June 11

The third time surge: 12,290 RMB/ton on December 6. This time is also the highest price of the year so far.

In 2019, there are also two downward.

The first time downward: 10,700 RMB/ton at the end of April and early May

The second time downward: 10,260 RMB/ton at the end of July and early August

Throughout 2019, the mainstream average price of natural rubber whole milk (Treasure Island) market as per SunSirs in East China was 10,650 RMB/ton on January 1, and 11,940 RMB/ton on December 24, an annual increase of 12.11%.

This year’s highest price was 12,290 RMB/ton on December 6, and the lowest price was 10,260 RMB/ ton on August 2. The annual maximum amplitude was 19.79%.

2. Important Issues on Natural Rubber in 2019

In the first half of 2019: the rubber industry has experienced droughts that have not been encountered for many years.

It has also undergone strict inspections by the customs for "mixed rubber".

In addition, it encountered export reductions from other three Southeast Asian countries and other rubber boosting measures.

Those influencing issues make natural rubber price ups and downs.

In the second half of the year: the price continued to fluctuate, experiencing the traditional peak season of consumption of "Gold September and Sliver October".

Coupled with the impact of heavy rain and fungal diseases in Southeast Asia, production is limited. Therefore, natural rubber market has improved.

In November, China’s domestic production area started to enter the cut-off period. At this time, funds gradually favored natural rubber, and it rose sharply on the beginning of the second half of the day.

Natural rubber finally stopped rising and raised funds ’attention. Since then, the trend has fluctuated. After a short-term price correction, it began to rise again in December.

It reached the highest price level on December 6, 2019, but the price has plummeted due to a large increase in domestic inventory on the 18th.

With the end of December, 2019 will finish. The shocking market of natural rubber will keep on going.

3. Raw Material Supply

In recent years, the global natural rubber has been at its peak production capacity.

According to ANRPC, the cutting area of ​​rubber has been steadily increasing since 2003. The area cut in 2003 was about 6.19 million hectares, which has risen to 9.06 million hectares in 2018, an increase of 46.36%.

The area of ​​new rubber species reached its peak in 2012. According to the 7-year growth cycle of rubber, the corresponding cutting period is in 2019.

The area cut in 2019, except for Indonesia, which fell by -2.2%, basically maintained growth in other countries. Among them, Thailand increased by 4.9%, Malaysia increased by 7.2%, India, Vietnam and China increased by 15.7%, 3.2% and + 2% respectively. Cambodia's increase was as high as 26.1%.

The actual production in 2019 is not as good as expected.

Due to the long-term fluctuation of natural rubber prices between 10,000 and 12,000 RMB/ton in recent years, the price has fallen to a quarter of the highest price in the past ten years. The low rubber price has affected natural rubber planting and harvesting. Annual growth slowed.

In addition, in 2019, domestic and foreign rubber producing areas first encountered drought, rainstorm fungal disease, and tapping costs and other factors.

Among them, the severe drought that has not happened for many years slowed the growth of gum trees, which may delay and shorten the tapping period.

The lack of water has reduced the production and regeneration rate of glue, and the yield has decreased significantly.

Indonesia, Malaysia, and Thailand have been attacked by fungal diseases before and after, and their production has been severely affected.

Indonesia has about 382,000 hectares of rubber plantations, especially Sumatra and Kaliman some parts of Denmark are particularly serious. Its natural rubber production in 2019 is expected to decrease by 15% compared to 3.76 million tons in 2018.

Thailand, the world's largest producer and exporter of natural rubber, accounts for 40% of the global rubber supply, and rubber parks with an area of ​​more than 330,000 rai have suffered from fungal disasters. Some people believe that the local natural rubber production may decline by 50%.

The ANRPC report shows that in the first half of 2019, the total global natural rubber production fell by 8.3% year-on-year to 5.853 million tons.

The countries whose output decreased include Thailand (-15.7%), Indonesia (-12.0%), China (-17.1%), and India (-4.1%) and the Philippines (-1.3%).

From January to July, the global natural rubber (NR) output was 7.039 million tons, down by 7.3% from 7.591 million tons in the same period of 2018.

The industry generally estimates that global natural rubber production will decline by 5% year-on-year in 2019.

ITRC believes that in 2019, rubber production in Thailand, Indonesia and Malaysia is expected to decrease by 800,000 tons.

4. Inventory

The domestic natural rubber stocks in 2019 will basically remain at a high level of more than 400,000 tons.

Until November 25th, the old warehouse receipts of the natural rubber in the previous issue were collectively cancelled.

According to data released by the Shanghai Futures Exchange in early November about 320,000 tons of old plastic warehouse receipts will be collectively cancelled, accounting for about 76% of warehouse receipt inventory in early November.

On November 25th, the old plastic warehouse receipts were officially cancelled. On the same day, 295,200 tons of warehouse receipts flowed into the spot market, and the warehouse receipts inventory also dropped to 165.74 million tons, which was the second lowest level after the warehouse receipts were cancelled in the past 5 years.

The amount of cancellation was much lower than the historical average.

Over the past years, the pressure on warehouse receipts has been released intensively, and Shanghai rubber has a rising base.

This is the best inventory change news for the market since 2019.

5. Import and Export

China Customs’ strict inspection of "mixed rubber"

China's customs data shows that from January to November 2019, China's natural and synthetic rubber (including latex) imports were highest in January and November and lowest in February and June.

Affected by the Chinese New Year holiday in February, manufacturers stopped working and employees were on vacation, and the overall operating rate was low.

In June, there was a notice from China Customs on April 30 on the strict inspection of "mixed rubber".

General Administration of Customs of China issued on April 28 issued a notice requesting that the mixed rubber currently imported through the customs number 40028000 customs declaration needs to be verified as a mixture of natural rubber and synthetic rubber.

For rubber mixtures with only synthetic rubber on the surface, they must be declared and taxed according to 4001.

On June 30th, after the notice spreading in the industry, rubber futures rebounded strongly,\ and short positions were lightened.

That day, the price of natural rubber rose by 400 RMB/ton on the day, an increase of over 2%.

Malaysia, Indonesia and Thailand (ITRC) decide to reduce the export of natural rubber.

The International Tripartite Rubber Commission (ITRC) has reached an export reduction agreement in March.

Thailand, Indonesia and Malaysia decided to jointly reduce the export volume of 240,000 tons of natural rubber to boost rubber prices.

Since April 1st, Indonesia and Malay have implemented the agreement as scheduled.

Thailand has been postponed due to the March general election. The measure was executed from May 20th to September 19th, which is valid for 4 month

June is the month in which the three countries simultaneously implement the plan).

The latest data show that natural and synthetic rubber (including latex) imports were 5.848 million tons in January-November 2019, a decline of 7.8% compared with the same period in 2018.

6. Downstream Demand

China’s tire industry contributes a lot to global economy.

In recent years, China's tire industry has grown rapidly. Since 2006, its output has consistently ranked first in the world. The total tire production capacity accounts for 35% of the global total production capacity. And the export volume accounts for about 50% of the total output. China's tire production in 2019 is in a continuous growth trend.

Higher technical requirement on tire

However, the rapid development of the tire industry has also caused some concerns about blind investment and overcapacity. The development of the automotive industry and the upgrading of market demand have put forward higher requirements for the technical performance and technological content of tire products. Driven by the new model and other factors, China's tire industry has entered a critical period of transformation and upgrading.

China's tire companies are experiencing a severe industry integration period.

In 2019, China's downstream tire companies experienced a severe industry integration period.

Dozens of rubber tire companies went bankrupt and were auctioned.

The country is very strict on environmental protection controls, and also strict inspection of tire companies.

Data show that the prosperity of the automotive industry in 2019 is still low, but the sales volume of heavy trucks has continued to increase in the second half of the year, driving the price of rubber higher.

In November 2019, China's heavy truck market sold about 94,000 vehicles of various types, an increase of 3% month-on-year and an increase of 5.3% year-on-year. This is the fifth month of heavy truck market growth since July 2019.

From January to November, the cumulative sales volume of the heavy truck market was 1.0744 million, a year-on-year increase of 1%. The market predicts that the overall sales volume of the heavy truck market in 2019 is expected to exceed 1.15 million units, thereby setting a new record for the annual sales of the heavy truck industry in China.

The analysis points out that the heavy truck industry has a high degree of prosperity, sales continue to increase, and the boom is maintained at a high level.

The main driving factors are the continuous increase in road transport demand and the strict implementation of heavy truck related systems. Some provincial council provides cash subsidies for heavy trucks that meet the "National III" and below emission standards, and some provinces and cities have banned the transportation of chemical products from vehicles below the National Level 5.

7. Market Forecasting

SunSirs’ natural rubber analysts believe that the natural rubber market in 2019 is in the domestic shutdown season.

Full-year output is expected to tighten.

There are downstream drivers of continuous growth in heavy truck sales, and there are long-term cancellations of futures inventory old orders in relatively low volume, which should be a positive factor for the long-term downturn in the natural rubber market.

Natural rubber does not have the possibility of a big drop.

The short-term counter-storage rushes to the high rebound trend.

In the long-term, the supply and demand will have structure changes. The long and short rhythm needs to be accurately grasped.

The Chinese traditional Spring Festival is approaching. The suspension of labor unions will cause holiday effects. The pre-holiday period is usually the stocking period. At this stage, natural rubber may rebound for a period of time.

Automobile consumption before the holiday needs attention as well. In the spring production season, the domestic cut-off period was still at that time, relying entirely on inventory and natural rubber supply in Southeast Asia. Attention on the impact of Southeast Asian weather and unexpected news on the market.

As for the natural rubber market in 2020, based on the suppression of the current low price for many years, it is less likely to have a dramatic increase.

Although the surge in rubber prices in the future is unpredictable, once the news stimulates and the impact of policies has caused a sharp surge in prices, it can always be expected.

If you have any questions, please feel free to contact SunSirs with support@sunsirs.com

 

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