In the middle of February, the natural rubber is turning into the situation of seasonal supply and demand, and the basic logic of the long-term trend remains unchanged.
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Not prosperous in peak season
In the peak tapping season of 2020-2021, the supply of natural rubber in Southeast Asia’s main producing areas is less than the peak level in previous years, and the support of raw material price still exists. Due to the influence of heavy rainfall, floods occurred in Yala Prefecture, beijnian Prefecture and Taogong Prefecture in southern Thailand recently. However, the temperature in some areas is low, which is not conducive to the growth of rubber trees and tapping operations. The supply of raw glue continues to be tight. Recently, there has been more rainfall in the south of Vietnam, but a new round of cold air has been ushered in in the north and North Central of Vietnam, resulting in the reduction of rubber production. In China, Yunnan and Hainan provinces have completely stopped cutting. In January, the expectation that natural rubber in Asia will return to high yield failed, and our previous judgment that the peak season was not prosperous was confirmed.
However, due to the low cost and rapid expansion, African natural rubber industry has gradually become a force that can not be ignored. Ivory Coast is one of the most important natural rubber producers in Africa, and its rubber export volume has increased rapidly in recent years. In the first 11 months of 2020, the export of natural rubber from Cote d’Ivoire totaled 1.0847 million tons, an increase of 35.2% year on year. Domestic rubber tire enterprises intend to set up factories in Africa, processing and importing local materials, which can not be ignored in the African supply side. In addition, 2021 may be the year of standard rubber import. In 2020, affected by the epidemic situation, the index rubber will not be able to enter the customs. I heard that the number of index rubber may rebound in retaliation this year.
On the whole, the long-term logic of global natural rubber production growth peaking and falling is stable, but we should be alert to the release of risk emotion caused by subject speculation.
Supply is hard to recover for months
According to the Agricultural Department of Thailand, narativa Prefecture is suffering from serious rubber tree defoliation. According to the latest news, the damaged rubber forest area accounts for as much as 94%, and the defoliation disease has reduced rubber production by 60%. The results showed that the strain of the disease was different from that of the past. Factors such as climate may be the cause of the variation. According to statistics, the output of natural rubber in Thailand accounts for about 40% of the world’s total output, and the output of natural rubber in southern Thailand accounts for about 67% of the whole country. Among them, the output of natural rubber in the four prefectures most affected by defoliation accounted for about 33% of that in southern Thailand, which was about 22% of that in the country. Under the attack of deciduous leaf disease, the rubber production in the main production areas of southern Thailand is worrying, and this impact is likely to continue to a new round of cutting season. In addition, Malaysia, another big producer of rubber, issued quarantine measures. To fully respond to the spread of COVID-19, Malaysia declared a state of emergency, and some regions restarted the action restriction order from January 12th to August 1st. Malaysia strengthened the blockade, which affected the production and export of natural rubber.
The recent situation of major rubber producing countries shows that it is difficult for global natural rubber supply to recover in the next two to three months.
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Tire pattern reshuffle
The development trend of China’s tire manufacturing industry is to completely eliminate backward production capacity, improve the industry concentration, and the downstream of natural rubber industry chain is facing re shuffling.
China’s tire industry reached the peak of production capacity in 2014. Since then, it has experienced “double anti” investigation and pressure and environmental protection policy impact. In 2018, China’s auto market entered a negative growth stage. In a long painful period, the backward production capacity of rubber tires has gradually cleared up. In 2020, the production and efficiency of domestic tire enterprises are steadily improving, but the differentiation of enterprise profitability is intensified, and the Matthew effect is more obvious. According to the statistics of the tire industry association, in 2020, 41 tire enterprises will go bankrupt, and the number of tire factories under monitoring will drop from more than 500 in the past to 390. At the same time, strong tire enterprises are in full swing to build overseas factories, in order to reduce the cost of raw materials and avoid trade risks.
With the capacity expansion of small and medium-sized enterprises, the pattern of “the strong take all” is increasingly prominent, and the living space below the scale is constantly compressed. Increasing concentration is the trend of most industries, and the rubber tire industry is no exception. Although the structural adjustment has resulted in the stagnation of natural rubber purchasing, in the long run, industrial upgrading is undoubtedly more conducive to the healthy growth of demand than savage expansion.
Auto market boom catalyzes demand
The Ministry of Commerce and other 12 departments jointly issued a number of measures to boost bulk consumption, key consumption and release rural consumption potential, including encouraging cities with limited automobile purchase to increase the number plate index, and launching a new round of automobile going to the countryside and exchanging the old for the new. In the second quarter of 2020, with the support of automobile consumption incentive policies, China’s automobile industry overcame the difficulties of supply chain rupture at home and abroad, rapidly resumed production after the epidemic, realized the transformation of automobile production and sales from negative to positive, and maintained positive growth for nine consecutive months. China Automobile Industry Association predicts that China’s automobile market will achieve slow and positive growth in 2021, and the automobile sales volume is expected to reach 26.3 million, with a year-on-year growth of about 4%.
Base vs growth rate is a classic topic in industry research. With the development of China’s automobile market, it seems inevitable that the growth margin will slow down, and the base will occupy a greater weight in the demand structure. For more than a decade, China’s automobile market has been a global giant. Referring to the mature automobile markets in Europe and the United States, the demand of new car sales for matching tires has become increasingly common, and the huge demand for replacement tires brought by car ownership will gradually become the dominant. In any case, China’s auto industry has entered the stage of active inventory replenishment. With the arrival of the vehicle replacement cycle, the growth trend is expected to continue in the next 2-3 years. As an important supporting industry of automobile, tire will benefit from the improvement of automobile market prosperity, and also play a catalytic role in the demand for natural rubber.
Stable supply and demand
In the past month, Southeast Asian plantations were able to harvest more rubber raw materials after the rainy season, and the yield release reached the peak within a year, and the yield would gradually decrease before the end of the cutting season. According to Longzhong information, cutting in northern Thailand began to stop gradually at the end of January, in some areas it will stop in early February, and in southern Thailand it is expected to stop at the end of February, which is basically in line with the phenological conditions of previous years.
The demand side of rubber tends to decline with the market situation. China’s main consumer market is approaching the Spring Festival holiday, during which the arrival of cargo will be delayed. In the downstream tire processing industry, due to the lack of containers in international shipping, it has caused great obstacles to export. Fortunately, the overall demand for natural rubber is relatively stable. Epidemic prevention promotes the rapid development of rubber glove industry, and encourages cities to relax the policy of lottery and stimulate rural automobile consumption.
At present, in terms of fundamentals, the price center of natural rubber will remain stable for a period of time, and the long-term rising channel has not changed.
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