It's hard to find a bosom friend at the top of the

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It is difficult to find a confidant at a high place. Shanghai Rubber adjustment and support

summary of the rubber market in January and February

February was an unsettled month for the commodity market. Market fluctuations intensified, and many commodities hit a historic high again. However, under the impact of the volatile situation in the Middle East, the trend of commodities differentiated. In terms of the rubber market alone, prices showed a trend of high opening and low going in February. After the Spring Festival, driven by the external market, the main 1105 contract of Shanghai Jiaotong Rubber Co., Ltd. opened significantly higher at a record high of 43500 yuan/ton, and this price also became the highest point of this month. Then the futures price began to decline all the way, and fell to around 38000 yuan/ton at the end of the month, falling 2635 yuan or 6.44% month on month, and the futures price returned to less than 40000 tons again

compared with Shanghai rubber, the price of Japanese rubber rose more vigorously. It fell only in late February driven by Shanghai rubber, and the Japanese rubber index reached a record high of 540.3 yen/kg. Although it fell later, the Japanese rubber still ended the trend in February with an increase. The Japanese rubber index remained at a high of 500 yen per kg, and the pattern of rubber being strong outside and weak inside was extremely obvious, Moreover, the intervention of arbitrage also contributed to this trend. Judging from the current price comparison, the ratio of Shanghai Rubber index and Japan rubber index fell to 77 from around 88 before the Spring Festival, and converted according to the central parity rate of the yen against the RMB, the Japan rubber index was converted into RMB 39200 yuan/ton, which was more than 1000 yuan higher than the Shanghai Rubber index. Therefore, from the perspective of price comparison and price difference, the rise of Shanghai Jiao was significantly smaller than that of the outer market

Figure 1: Shanghai and many other companies and institutions, the government of the Democratic Republic of Congo (DRC) and the organization for economic cooperation and development (economic cooperation and development) glue index and Japanese glue index closing price trend

the figure shows the Shanghai glue index and Japanese glue index closing price trend chart. (picture source: Wenhua finance LUZHENG futures)

II. Market cause analysis

1 Tensions in the Middle East hit financial markets

following the dramatic confrontation between North and South Korea, the flames of war in the Middle East rose again, and Tunisia's "Jasmine revolution" defeated Ben Ali, who had been in power for 23 years. The butterfly effect has spread rapidly in the Middle East and Africa, and the political situation in Libya is still in turmoil. The turbulence in the Middle East has disturbed the global crude oil market

whether the fourth "oil crisis" is coming is still an uncertain question. As the market is worried that the world's crude oil supply may be interrupted on a large scale in the future, the crude oil price in New York market once exceeded $100/barrel. This is the first time that the US crude oil price has reached US $100 since October 2008. On February 23, the Brent oil price in London broke through $110 a barrel and closed at $111.25 a barrel. In addition, as a commodity with risk aversion function, gold is also favored by investors, and the price has risen for four consecutive weeks. But on the other hand, affected by the same factors, other commodities fell instead of rising. Compared with crude oil and gold, the prices of agricultural products such as soybeans and American cotton fell from their high levels in late February

from the analysis of major global economies, the economic data released by major economies with too high indoor humidity assumption recently shows that the economy is running well. Although the U.S. unemployment rate remains at a high level, it has fallen from 9.8% in November last year to 9% in January this year. According to the data released by the U.S. Department of labor on February 19, the number of initial jobless claims fell to 390000 in that week, lower than the previous expectation of 400000. The US Economic Cycle Research Institute (ECRI) said on February 25 that an index measuring the future economic growth rate of the United States has climbed to the highest level since the end of May last year, indicating that the economy has shown a strong recovery momentum. The survey released by the Federation of industry and Commerce of Germany, the largest economy in Europe, on Wednesday showed that the forecast value of GDP growth rate in 2011 was raised by 3.0%, higher than the original 2.4%

from the domestic situation, one of the focuses of attention in March is undoubtedly the convening of the two sessions. This year's "two sessions" will still focus on the adjustment of economic structure and the improvement of people's livelihood on the whole. What is different from last year may be that we need to solve the "urgent need" of rapid price rise. Data released by the National Bureau of statistics showed that in January, the overall level of consumer prices rose by 4.9% year-on-year. Among them, the urban growth rate was 4.8%, and the rural growth rate was 5.2%; Food prices rose by 10.3%, while non food prices rose by 2.6%; The price of consumer goods rose by 5.0%, and the price of service items rose by 4.6%. Although the weight of CPI has been adjusted, the 4.9% increase still shows the phantom of rising prices, and the state's efforts to regulate prices are not expected to weaken, just like the announcement on regulating rubber prices issued by the national development and Reform Commission (see Part II)

Figure 2: year-on-year growth trend of domestic CPI and PPI

the figure shows the year-on-year growth trend of domestic CPI and PPI. (picture source: LUZHENG futures)

2. Tight supply has supported the rise of spot prices

at present, major rubber producing countries have successively entered the off-season of rubber tapping, and it is inevitable that the seasonal supply of natural rubber will decrease in the next three months. For example, after the high production period of tapping in January in Thailand, the number of tapping in February, March and April will gradually decline, and April will be the least. The Thai Rubber Research Association said that at present, some planting areas in northern Thailand have entered the low yield season. According to the prediction of the association of natural rubber producing countries, the rubber production will decline by 45% to 60% compared with the peak during the winter season that lasts until May

Figure 3: trend chart of Asian rubber spot quotation

figure shows the trend chart of Asian rubber spot quotation. (picture source: LUZHENG futures)

tight supply is usually accompanied by strong downstream demand. The domestic automobile industry continues to maintain high-speed growth. According to the data released by the automobile industry association, China's automobile production and sales got off to a good start in January 2011, and both automobile production and sales and exports showed a certain growth year-on-year. On the whole, China's automobile production and sales showed a steady growth trend in January. The specific characteristics are as follows: in January, the production and sales of automobiles were 1797900 and 1894400 respectively, with a year-on-year increase of 11.33% and 13.81% respectively; Production decreased by 3.58% month on month, and sales increased by 13.67%. It can be seen from the data in January that although the monthly sales volume hit a record high, the overall growth rate has fallen sharply, and the month on month production has declined. This situation is mainly related to the withdrawal of relevant consumption encouragement policies and the implementation of purchase restriction policies, the high base of the previous year, and various enterprises' production reserves for the festival at the end of the previous year

however, from the perspective of national price regulation, the high rubber price has obviously attracted the attention of relevant departments. Due to the high price of natural rubber, domestic tire enterprises complain repeatedly, and the profit of the tire industry at the current price of enhancing durability is meager. A report recently released by the national development and Reform Commission said that since October 2010, affected by the rapid rise in natural rubber prices, the cost of tires has increased significantly, and the efficiency of enterprises has declined significantly, and a considerable number of enterprises have fallen into losses. If the high rubber price continues for a long time, it will seriously affect the healthy development of China's tire industry. The report said that the relevant departments attach great importance to this and are studying and formulating relevant policies and measures. Among them, relevant departments will strengthen market regulation, severely crack down on illegal speculation, and curb the rapid rise of rubber prices; At the same time, we should strengthen the guidance of industrial development, tighten access standards, speed up the elimination of backward production capacity, curb low-level redundant construction, and reduce the growth of natural rubber demand

Figure 4: domestic tire production and natural rubber consumption from 1999 to 2010

the figure shows domestic tire production and natural rubber consumption. (picture source: LUZHENG futures)

in terms of inventory, according to the data released by Shanghai Futures Exchange, the registered warehouse receipts fell for five consecutive weeks. As of February 25, the inventory of rubber futures was 38685 tons, and 5205 tons of registered warehouse receipts were cancelled this month. As China is in the cut-off period, the domestic downstream rubber consumption industry is currently mainly consuming inventory, and the inventory will continue to decline in the future

note: the reprinted content is indicated with the source. The reprint is for the purpose of transmitting more information, and does not mean to agree with its views or confirm the authenticity of its content

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