Where Will the Rubber Price Go After a Sharp Drop?

The market trend driven by the shortage of deliverable goods has basically run its course. With the gradual stabilization of the overseas epidemic situation, although there is still a possibility of recurrence, the probability of the rubber price rising driven by the continued significant increase in glove demand is decreasing. However, since the overseas epidemic has not ended, the demand for gloves is likely to remain stable for a relatively long time. Therefore, the driving force for the passive increase in the price of whole latex due to the strong price of concentrated latex will also tend to stabilize. Before the overseas rubber - tapping season, there will be little change on the supply side, and the price of Shanghai rubber is more likely to remain stable. Whether it can continue to rise in the later period depends on whether there is room for an increase in the price of surrounding tire rubber.

From the perspective of valuation, the current raw material price has returned to the normal and relatively high range. The valuation of light - colored rubber is not low, and the valuation of mixed rubber is at an intermediate level. As the spread between futures and spot prices continues to narrow, the hedging pressure on the market will gradually be released in the later period.

The prosperity of domestic heavy - duty truck sales may continue until the end of the second quarter. The sales volume of automobiles is expected to maintain a good growth rate under the domestic automobile stimulus policies. However, it is unlikely that there will be a return of domestic tire export orders due to the recovery of overseas demand in the second quarter. Therefore, we expect that domestic demand can still be maintained in the second quarter, and the operating rate of tire factories is unlikely to decline in the short term.

Looking at the supply - demand situation in the second quarter, domestic production is recovering. The supply of whole latex corresponding to Shanghai rubber is increasing while the demand remains basically unchanged. The supply - demand situation is weakening on a quarterly basis, which may be more reflected in the fact that the excessive premium of the mixed - rubber price cannot be sustained. Overseas, it is still in the off - season for supply, and the problem of raw material squeezing for domestic concentrated latex still exists, resulting in a relatively strong cost floor for whole latex, which may limit its room for decline. The upward driving force for the price of whole latex in the second quarter mainly comes from the driving effect of surrounding rubber varieties, mainly tire rubber. As for mixed rubber, its corresponding supply is in a relatively scarce period, while the demand continues to increase. The inventory at domestic ports is expected to continue to decline until May or even later. Therefore, the price of mixed rubber is expected to continue to rise, driving the price of whole latex to move up slowly. Judging from the inventory changes of light - and dark - colored rubber, it is conducive to the continued narrowing of the price spread between whole latex and mixed rubber, as well as the price spread between RU and NR.

In terms of operation, it is recommended to continue to short the spread between RU and NR in the second quarter, or buy NR and RU on dips.

Risks: A significant build - up of inventory, a large release of production due to improved weather, and continued weakening of demand.