Natural rubber short open probability increase

Before and after the Spring Festival, due to the domestic natural rubber cuts and the Thai government's purchases and storage made the market can reduce the impact of the target, Hujiao appeared in a wave of rising prices. However, as time goes on, this bullish factor is turning negative. The price of Hujiao recently fluctuate within a narrow range and there is no change. In the short term, it still maintains a low and weak operation.

Thailand's purchase and storage are temporarily closed

In order to support the prices of natural rubber, the Thai government has allocated a total of 12 billion baht to purchase domestic natural rubber at a price higher than the market price. It is expected to purchase 130,000 tons of natural rubber raw materials. Although the Thai government’s collection and storage policies are beneficial to the earnings of plastic farmers in the short term, it will not be conducive to the decarbonization of the entire natural rubber industry in the long term, and the phenomenon of cutting or desertion of rubber trees will not occur in large numbers. Therefore, the supply will continue to show growth. Natural rubber prices pressure.

If the Thai government stops purchasing and storage, it will bring direct pressure on the market. From the point of view of the gap between the varieties of plastics, the gap between rubber and rubber and synthetic rubber has reached a historical high, indicating that this rise in natural rubber is not accepted by the fundamentals, and is mainly affected by policy factors. Once the policy stops, , natural rubber prices are very likely to fall short-term. On March 10th, the Thai government suspended purchasing stocks, and the price of natural rubber raw materials fell by 20% on the same day, showing the fragility of current prices. In short, with the peak season of Thailand's glue production, the Thai government's efforts to save reserves will be weakened or even suspended, which will put pressure on natural rubber prices.

The economy is still in the stage of de-capacity

The latest published economic data has no bright spots. First of all, the PPI shows that the economy is still in the stage of capacity-reduction, and there is little demand for companies to stock. Although monetary policy tends to be loose, corporate debt costs are still high, and they also lack the ability to stock. Second, the CPI shows that the risk of domestic deflation has intensified, and the concept of inflation has gone. With long-term material prices continuing to fall, companies have no reason to stock up. As a whole, the downstream consumption of natural rubber is not prosperous, and it is in the de-stocking phase. Inflation expectations are not strong and the industry chain cannot bring hoarding demand.

Cost factors limit prices too much

Although the contradiction in natural rubber oversupply still exists, natural rubber prices do not drop smoothly. Current cost factors as well as absolute low prices will limit the short-term interest in natural rubber. Although the economics of smallholders produced by natural rubber determine the cost is not rigid, and at the same time there is a lack of strength and timeliness in price response, the economic laws will still play a role slowly. As the price of natural rubber continues to fall, it eventually leads to a reduction in supply and thus support prices. Shorter down pressure, the stronger the firm buying resistance suffered, the greater the risk, and the probability of profit-taking after the short-term big drop in natural rubber is determined to be greater, thus limiting the price of natural rubber to go too far.

In short, natural rubber fundamentals are being transformed from bullish to bearish. Investors should maintain their short-sighted thinking, suggesting short-selling rallies and rolling operations.