SunSirs: China Rubber and Plastic Market Growth Narrowed in June, or will Continue to Narrow in July

From the perspective of the trend of the rubber and plastic index of SunSirs, the rubber and plastic index continued to rise in June, from 590 points at the beginning of the month to 612 points on June 30. The overall increase at the end of the month was 3.73% compared with the beginning of the month, but the increase was lower than that in May.

From the perspective of variety performance, the rubber and plastic products in the rubber and plastic list of SunSirs in June increased more than that of the previous month. Among the 18 varieties monitored by the business agency, 14 kinds of commodities increased on a month on month basis, accounting for 77.78% of the total commodities monitored in this plate.

According to the price monitoring of SunSirs, in June 2020, the rubber and plastic plate in the list of commodity prices rose or fell by 1.81% and 3.83% in May. In the list, there were 5 kinds of commodities with an increase of more than 5%, accounting for 27.8% of the total number of commodities monitored in this sector; the top three commodities with an increase of 5% were LDPE (8.09%), HDPE (7.85%) and BR (5.77%). The top three commodities in the decline list were PP (melt blown) (-19.44%), NR (-0.42%), and NBR (-0.24%).

In terms of the downstream characteristics of the rubber and plastic industry, the downstream rubber industry is mainly composed of tire enterprises. Affected by the international trade situation, the tire export has continued to be blocked since this year, and the downstream tire production has dropped sharply year-on-year. According to the data, in the first five months of 2020, the cumulative export volume of China's rubber tires was 2.11 million tons, a year-on-year decrease of 18.6%; from January to May, the cumulative export of new pneumatic rubber tires was 160 million, the year-on-year decrease was 21.1%. According to the data, in May 2020, China's rubber tire production was about 68.929 million, a year-on-year decrease of 4.32% and a month on month increase of 3.48%. From January to May, China's rubber tire production was about 287.193 million, down 14.6% year-on-year.

However, the downstream domestic consumption of plastic products and agricultural film accounts for a large proportion, and the impact is relatively small. The overall recovery of the plastic industry is better than that of rubber. According to the business agency, from January to May of 2020, the output of the national plastic products industry was 27.554 million tons, a year-on-year decrease of 4.2%. In May, the output of the national plastic products industry was 6.69 million tons, with a year-on-year increase of 9.2%.

In early June, the OPEC+ meeting decided to extend the production reduction for one month to the end of July, and Member States made efforts to improve the implementation rate of production reduction, which became an important driving force for oil prices to continue to rebound in June. But COVID-19 infections continue to increase and the economic restart is still a substantial blow to crude oil prices. Affected by this factor, both WTI and Brent crude oil showed a narrow trend in June after a sharp rise in May. The cost faces the rubber and plastic market to push up sharply, but there is still strong support.

In June, China's Manufacturing Purchasing Managers Index (PMI) was 50.9%, up 0.3% from the previous month. The commodity supply and demand index (BCI) of the business association was 0.18, with an average increase of 1.07%, reflecting the expansion of the manufacturing economy in the month compared with that of the previous month, and the economy was running smoothly. With the gradual recovery of manufacturing industry, the price and volume of rubber and plastic market continue to rise.

According to SunSirs, LDPE rose from 7,725 RMB/ ton at the beginning of the month to 8,350 RMB/ ton at the end of the month, an overall increase of 8.09%. In June, the PE plants were overhauled, the overall operating rate reached the lowest in six months, the operating rate reached 80%, and the domestic supply decreased. In addition, the tight supply of some brands and the rise of petrochemical prices have pushed up the price of PE. However, with the arrival of the off-season, downstream enterprises start to show signs of decline, and the demand side is slightly weak, thus inhibiting the rise of PE price.

The price of PP melt blown material has a big drop. According to the monitoring of SunSirs, the price of PP melt blown material at the beginning of the month is 24,000 RMB/ ton, and the price at the end of the month is 19,333 RMB/ ton, with an overall decline rate of 19.44%. On the one hand, after the global anti epidemic material capacity expansion, the mask production capacity is sufficient, and the demand for PP meltblown material is further reduced under high inventory. On the other hand, the domestic PP melt blown material supply is relatively sufficient. Supply and demand tension eased, PP meltblown material prices fell.

Natural rubber showed a slight weakness in June. According to the monitoring of SunSirs, the price of natural rubber at the beginning of the month was 10,120 RMB/ ton, and the price at the end of the month was 10,078 RMB/ ton, with a slight decline of 0.42%. First of all, natural rubber inventory pressure is still large, suppressing the rising space. It is understood that as of June 23, the registered warehouse receipts of Shanghai Futures Exchange were about 230,000 tons, about 184,000 tons lower than the same period last year. However, the increase of natural rubber inventory in Qingdao free trade zone is more than 260,000 tons compared with the beginning of the year. Secondly, in June, the new natural rubber cut less and the import volume was insufficient, which formed a certain support for the price of natural rubber. According to SunSirs, in June, the cutting conditions of new rubber in Yunnan and Hainan were insufficient, and the output was very low. In addition, due to the special situation in 2020, the import index originally issued in April had not been opened up until June. Finally, the improvement of downstream tire market is limited and it is difficult to form strong support for natural rubber. On the whole, supply and demand factors restricted the upward channel of natural rubber in June.

Market Forecast

SunSirs rubber and plastic industry analysts believe that, in July, rubber and plastic market will be weaken. From the perspective of cost, the crude oil is hovering around $40 / barrel. Affected by COVID-19 and the overseas demonstrations and protests at the end of May, the prospect of crude oil demand is not optimistic, and the probability of crude oil rising sharply again is small, so it is difficult for the cost to have new support for the rubber and plastic market. From the perspective of demand, July was in the off-season of plastics and rubber industry. In addition to the global epidemic of COVID-19, export was more difficult than in previous years. The rubber and plastic market was basically supported by domestic demand, and overall, the support for the rubber and plastic market was not strong. Overall, it is expected that the rubber and plastic market growth in July will continue to shrink, and the rising varieties may decrease.

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