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Supply Pressure Will Release Hujiao To Maintain A Weak Pattern

Zhangjiagang Sansu Machine Co.,Ltd | Updated: Apr 04, 2018

Since March 26th, Hujiao has shown signs of stabilizing after the negative factors are released. The main 1809 contract rose slightly by 40 yuan/ton or 0.35% yesterday (April 2) and closed at 11,575 yuan/ton. Analysts pointed out that the expected oversupply of the natural rubber market in the future still exists, and near the Southeast Asia tapping season, the pressure on the supply side will quickly become prominent, which is not conducive to rebound in rubber prices.

The season begins

“Although it is currently avoiding the adverse effects of macroeconomic factors, but based on the current weak attitude of Hujiao fundamentals, it is expected that the new main force 1809 contract will still face greater short selling pressure after the month shift, the main theme of the weak decline has not been fundamental. There was a twist on it," said Baodong Futures analyst Chen Dong.

Chen Dong pointed out that it is less than half a month from the Thai Songkran Festival (April 13th -15th of the year). According to the seasonal rules of rubber production, each year, the rubber-producing countries in Southeast Asia will usher in a new year's tapping period after the Songkran Festival. Among them, rubber production in northern Thailand and central and southern Vietnam will recover in mid-April, and at the end of April to early May, southern Thailand, Malaysia and North Indonesia (Mandaland) will usher in tapping, and glue production will rebound rapidly. . In other words, the pressure on the supply side of the plastic market will be highlighted in the future.

“The global production areas will be cut in succession from April onwards; after three months of limited production, the reduction in export volume before Thailand and Indonesia will be released in concentration,” said Xu Lin, an analyst at Cinda Futures.

Judging from the domestic natural rubber production areas, the current domestic natural rubber production areas in Yunnan due to a suitable climate, rubber trees grow well, there are plans to advance cutting.

"This year, there is no such thing as drought, powdery mildew, and low temperature. It is expected that the date of cutting off the entire rubber will be about half a month earlier than in previous years." Chen Dong said that a class of rubber planting areas such as Mengla Farm in Xishuangbanna, Yunnan, etc. In mid-March, the other two types of rubber planting areas will also be opened in late March or early April. The overall cutting time is one month earlier than last year.

Waiting for rallies to short the opportunity

“From the demand side, the recent start-up of tyre manufacturers in Shandong Province was in good condition, but affected by the emergency plans for heavy pollution in some counties and cities, Guangrao and other cities and counties restricted the production of factories and caused certain impact on the start-up of individual factories, resulting in the entire The operating rate of the tire industry was normal and there was no more than expected growth compared to last year, said Chen Dong.

At present, the purchase of downstream tires is still based on procurement and purchase, there is no intention to make up a large amount of inventory, the overall raw material inventory days are maintained at 15 days to 30 days, maintaining a stable inventory level; raw materials inventory cycle for medium and large-sized rubber companies is about 30 days - For 40 days, the raw material in the small factory is maintained at a level of 3 days to a week.

"Because the tire companies own raw rubber inventory to maintain a reasonable level, the pace of procurement remains rigid, resulting in the current demand for natural rubber is difficult to get beyond the expected growth, which also led to some pressure on the inventory sector." Chen Dong said.

Xu Lin pointed out that domestic rubber stocks are still at a high level, with the convergence of the current price gap, the liquidity of arbitrage stocks continues to improve. At present, the lack of a substantial rebound in the spot basis, the price will be subject to containment, the current wait and see, wait for the spread of the price difference after the opportunity of high altitude.

"Although Hujiao futures are temporarily out of the macro-side of the negative risks, but in the pressure of the supply side to pick up and weak domestic demand, the future of rubber fundamentals remain weak." Chen Dong said.