Rubber continues to heat up prices

Jul. 01, 2019

Rubber continues to heat up prices shared the sinotruk reducer supplier.

Rubber experienced a mild rise in September and an acceleration in early October. Recently, the main contract has started to pull back after a rise of up to 20%.

Weather speculation on the supply side is heating up again. In the first half of the year, severe drought occurred in Thailand, Vietnam and other major rubber producing countries, which led to a delay of more than one month in the New Year's cutting period. The excessive rainfall after cutting also affected the rubber cutting work, leading to difficulties in purchasing raw materials for local processing plants and insufficient production. Thailand's rubber industry is expected to see a 20 percent drop in rubber production this year, the country's rubber industry authority said. The increasing probability of la Nina will likely bring more rain and flood risk to the region in the coming months during the high yield period of tianjiao. In 2010, la Nina weather triggered floods in 51 of Thailand's 76 provinces, especially in the main southern production areas, which once affected rubber supplies.

Spot inventory fell for 7 months, the inner and outer disk upside down disappeared. As of September 30, the inventory of various types of rubber in Qingdao bonded area was 91,900 tons, down 11.2% month-on-month. Natural rubber was only 55,800 tons, less than 30 percent of the peak at the beginning of the year and the lowest since statistics began in 2011. From the change of port trade concentration area, in addition to the long cycle of inventory decline, it is more noteworthy to pay attention to the change of the price difference between goods and spot. Rubber bear market has become a normal situation of cargo higher than the port spot upside down, in late August appeared to change. Take Thailand imported standard glue as an example, the situation of spot premium cargoes has continued for more than a month, indicating that the downstream acceptance of high prices increased, pricing into the seller's market.

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Tire starts were better than last year and auto sales were brisk in September, supporting rubber demand. During the traditional summer slack, tyre starts were relatively flat at about 70%, just below their peak in April and generally better than last year. At present, the auto industry is in the peak season of "gold, nine and silver, ten". In September, the production increased 32.82% compared with the same period last year, while the sales volume increased 26.14%, which is better than the historical period. In the long term, due to the policy of halving the automobile purchase tax and the increasing investment to drive the consumption of commercial vehicles, domestic tire consumption keeps up, which is good for the demand of rubber raw materials.

Synthetic glue price successively high, the day glue substitution effect highlights. In September, the price of synthetic rubber started to soar. The market price of styrene-butadiene rubber in east China rose from 10,750 yuan/ton to 15,000 yuan/ton after the National Day, with a cumulative increase of nearly 40%. The biggest reason for the rise of synthetic glue is the shortage of raw material butadiene and price rise. Observing the historical price trend, synthetic glue and butadiene are closely linked. Since June this year, the price of butadiene has been rising all the way, and has broken the three-year high, which has strengthened its driving effect on synthetic glue. In the production of rubber tires, natural rubber and synthetic rubber have a certain degree of mutual substitution, the current mainstream of synthetic rubber prices have exceeded tianjiao, if this situation continues, is expected to increase the demand for tianjiao.

In general, weather factors bring the risk of rubber supply end, while the continuation of domestic destocking cycle, the disappearance of port prices upside down, the peak season performance of tires and automobile industry, reveals that the demand end will improve, synthetic rubber inflation is expected to bring alternative demand, rubber prices can still rise in the later period.

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