Rubber prices rebound by nearly 30% in March Oversupply problems are difficult to reverse

In the past three months, natural rubber prices have rebounded by 30%, driven by market boost policies such as the world’s largest natural rubber production area, the Thai government’s support measures, and reductions in exports. However, the current market conditions are still good and bad. Stalemate. Due to sluggish demand growth in China, and rubber production is increasing year by year, the problem of oversupply is still ingrained.

At present, the international natural rubber production volume is in the expansion phase. Statistics show that natural rubber production in August increased by 26% from the low point in the past three years. The Natural Rubber Producing Countries Association (ANRPC) has recently raised its 2012 natural rubber production forecast, from a previously forecasted increase of 4.7% to 10.833 million tons, which is expected to increase by 5.0% to 10.863 million tons. According to ANRPC data, natural rubber production in 2011 increased by 8.7% to 10.342 million tons.

The Association of Natural Rubber Producing Countries also stated that as growers increase productivity and replant plans, by 2013 natural rubber production will reach its highest level in nearly nine years. In 2014, it will reach 11.10 million tons, and in 2018 it will reach 14.4 million tons.

Faced with such a rapid production expansion, rubber prices are under pressure. Thailand, Indonesia, and Malaysia account for 70% of the world's natural total supply. The three countries agreed to take measures to limit the reduction of exports and take down the old-age plastic trees from October 1 to reduce the supply of natural rubber by 450,000 tons.

However, the natural rubber-producing countries have raised their countermeasures for three months and the effect is weakening. The decline in the price of synthetic rubber raw materials is also one of the negative factors. Synthetic rubber based on butadiene is mainly used for the manufacture of ground contact surfaces for automotive tires. Butadiene spot trading prices in East Asia now hover around $1,850 to $1950 per ton. Compared with the high of 2,500 US dollars set in July, it dropped about 600 US dollars, about 25%.

In view of the slowdown in the growth of China's auto sales, China's demand for natural rubber will probably continue to decline next year. China’s new vehicle sales in September decreased by 1.8% from the same period of last year and decreased to 161,400 units. The accumulative growth rate fell for the first time after increasing for eight consecutive months, and was once again below the level of the same period of last year. Not only that, the profits of car companies are also falling, and even a loss. According to the China Association of Automobile Manufacturers, it is expected that the increase in China's auto sales next year will likely record the lowest increase in 13 years.

In the face of uncertain market prospects, despite the improvement in the start of construction of Shandong tire factories since August, the operating rate of tires for all-steel tires rose from 60% to 70% to around 80%, and that of semi-steel tires rose from 70% to over 90%. Seasonal production season and rising prices have made tire factories passively purchase raw materials to meet production and control costs, but most companies still use on-demand purchases, and the enthusiasm for stock picking is not high.

“Basically, there is no fundamental reversal in the contradiction between supply and demand, and the long-term weakness will continue.” Zhang Yuanhong, an international futures rubber analyst, believes that the consumer cycle has not yet reversed, and the long-term cycle weakness will permeate the fourth quarter; the price structure rebounded recently. Continuity is also weakening, and the spread correction will lead to a mid-level correction in the market.

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