Issue view: Macroscopically, at the beginning of the New Year, the outbreak of COVID-19 in China hit the market. Plus, the economy was greatly affected in the short term. In terms of supply and demand, production areas in southeast Asia have gradually stopped cutting since January, and the world has entered a period of low production. Raw material prices in production areas remain firm, which has certain support for rubber prices. Domestic producing areas have stopped cutting since the end of last year, and domestic rubber imports continue to weaken.

In terms of inventory, Shanghai futures exchange rubber inventory fell to a low in recent years, and inventory pressure greatly reduced. No. 20 plastic warehouse receipt is increasing steadily, and we pay attention to the delivery of the first contract. Qingdao bonded area rubber inventory growth rate is slower than in previous years. 

On the demand side, during the Spring Festival holiday, the opening rate of domestic automobile tire factories dropped to the low point of the year. Due to the impact of the epidemic, the recovery time after the holiday will be delayed, and the transportation and logistics will be seriously affected. Domestic auto sales improved in December but fell throughout the year. Dealer inventory pressure remains, and sales will fall sharply in January and February.

On the whole, since the production areas stopped cutting in February, the supply side entered into a seasonally tight state, but the demand side fell sharply due to the impact of the epidemic. Therefore, we paid attention to the recovery of the future market.

Strategic suggestion: Shanghai glue main force 2005 contract was waiting for a new round of bottom to participate in the new multiple orders, below the reference support range of 10,000-10,600 yuan/ton.

Shanghai rubber 5-9 spreads overall weak trend. Yunnan latex and Shanghai rubber 2005 contract base difference are relatively low. Shanghai rubber May contract and No. 20 rubber may contract spread from the high began to fall sharply. 

1. Market review

In January, the main Shanghai rubber 2005 contract fell, ending the previous three consecutive months of gains No. 20 glue main 2004 contract prices also fell significantly. Spot prices remain relatively firm, watching whether there will be a fall after the holiday.

In terms of price spread, Shanghai rubber 5-9 price spread trend is weak. Because of the gradual cessation of domestic latex cutting and that foreign 20 rubber still in the production season, Shanghai rubber 2005 contract and 20 rubber 2005 contract spread in high operation. The basis difference of Yunnan latex and Shanghai rubber 2005 contract was closed in January, approaching the level water state.

Since December 2019, continuous influenza and related disease surveillance has been conducted in Wuhan, Hubei province, and multiple cases of viral pneumonia have been detected, all of which were diagnosed as viral pneumonia/pulmonary infection. 

On the evening of 30 January 2020, local time, the world health organization (WHO) declared the outbreak of the novel coronavirus a public health emergency of international concern (PHEIC). By 2:00am on February 3, the national health commission had received a total of 20,438 confirmed cases from 31 provinces (autonomous regions and municipalities directly under the central government) and the Xinjian production and construction corps, with 2,788 cases of severe illness, 425 deaths, 632 cured and discharged, and 23,214 suspected cases. So far, a total of 221,015 close contacts have been traced, and 12,755 people have been released from medical observation on the same day. Currently, 171,329 people are under medical observation.

Coronavirus (CoV) is an enveloped single-stranded RNA virus that spreads widely in humans, other mammals and birds and can cause respiratory, intestinal, liver and nervous system diseases.

Seven CoVs are known to cause disease in humans, of which four CoV-229E，-OC43，-NL63 and -HKU1 are prevalent in the population and often cause common cold symptoms. The other three types of SARS-CoV and MERS-CoV, including the 2019-nCoV, are highly dangerous, causing severe pneumonia and even death. 

According to the introduction, some research results have been published on the COVID-19, which has certain reference significance for epidemic prevention and control. Epidemiological studies showed that the median age of patients with COVID-19pneumonia was 59 years, 56% were male, and the mean incubation period of viral infection was 5.2 days (95% confidence interval 4.1 to 7.0), with 95% distribution points of 12.5 days. The average viral transmissibility was 2.2. Fever is still the typical symptom of patients with 2019-ncov infection. Although asymptomatic infection has been reported, it is not the main body. Currently, for prevention and control, it still needs to focus on the majority.

Chinese Academy of Engineering, a new coronavirus infection pneumonia outbreak zone spreading work mechanism researches team on February 2, Zhong Nanshan again to accept Xinhua news agency reporters in an interview, "the national epidemic is still in the upward stage, but we should judge will not produce a burst of national, and local outbreak may only. To this end, our government and relevant departments have taken a number of national measures including extended holidays, traffic control, temperature screening in public places, active publicity on less gathering, personal protection knowledge, etc. The improvement of public safety awareness has also ensured the smooth implementation of relevant measures. These measures have effectively blocked the source of infection and greatly reduced second - and third-generation transmission. We believe the outbreak is expected to peak in the next 10 days to two weeks."

The domestic commodity future closed down at a large spread since the first day after spring holidays.

Rebar, iron ore, crude oil, fuel, methanol 20, rubber, plastic and so on more than 20 varieties has a drop stop. Precious metals, iron alloy, and a few varieties, rubber 2005 put options by collective rally of the previous period, which the price of 12250 puts up more than 1000%. The mood is very bearish.

2. Pay attention to macroeconomic indicators, and the central bank guarantees market liquidity

The purchasing managers' index (PMI) of China's manufacturing sector was 50.0% in January, down 0.2 percentage points from the previous month, according to a survey of purchasing managers released by the service sector survey center of the National Bureau of Statistics and the China Federation of Logistics and Purchasing on January 20, 2020. Since the time of the investigation was before January 20, the impact of COVID-19 caused by the new coronavirus infection during the investigation had not been fully revealed in the investigation, the trend of the later period should be further observed.

The Caixin China manufacturing purchasing managers' index (PMI), released on February 3rd, edged down 0.4 percentage points in January to 51.1, a five-month low. The trend is in line with the national bureau of statistics' manufacturing PMI.

Reverse repurchase due to hedge open market and concentrated financial market funds due to the influence of factors such as maintenance of COVID-19 prevention and control of special period abundant liquidity in the banking system is reasonable. On the first day after the central bank reverse repurchase operation on schedule to carry out 1.2 trillion yuan, including 7-days reverse repurchase at 900 billion yuan and 14-days reverse repurchase at 300 billion yuan, with operating rate cutting 10 basis points. 

The central bank said it will continue to closely monitor market liquidity in the special period of outbreak prevention and control to ensure adequate liquidity supply. To this end, market participants generally expect that after the reverse repo rate reduction, the central bank will probably lower the medium-term lending facility (MLF) interest rate, thus driving the market quoted rate (LPR) down, reducing the financing cost of the real economy and mitigating the impact of the epidemic on the real economy.

3. The cutting season has come to an end in southeast Asia, and the price of raw materials is relatively firm

With the temperature dropping, northern Thailand is the first to enter the cutting season. In early January, the rubber garden began to stop cutting in succession and the production decreased significantly. The production area is expected to stop cutting in the latter half of the year. 

The southern part of the country entered a strong production season in late December, with good weather and smooth output, but suppliers still said raw material purchases were relatively tight. People in the producing areas said that the rainfall around the New Year’s Day this year was less than usual. The main producing areas are relatively dry or have the possibility to stop cutting ahead of time. 

Therefore, in this expectation, faced with the pressure of long delivery and insufficient glue output in the cutting period, suppliers are more motivated to purchase raw materials, which pushes up the purchase price of raw materials. Production cuts in southern Thailand are expected to begin in February. At present, the raw material reserves of suppliers can roughly meet the consumption of 2-3 months. It is expected that the purchasing atmosphere of raw materials in the market will remain high before the Spring Festival.

Malaysia production area is seasonal flourishing season. The weather is good, and the output is normal. Driven by the double advantages of strong operation of the futures market and active reserve of raw materials before cutting, the purchase price of raw materials is high. It is expected that the main natural rubber producing areas in Malaysia will stop cutting normally.

Indonesia's output of raw materials remained tight. The Medan area north of the equator is gradually transitioning to a low-yield season, which will theoretically enter the cut-off period in February. In Jugang area south of the equator, a new round of rubber cutting cycle has come, but the initial raw material output is limited. In addition, the impact of fungal diseases on the output of rubber trees still exists, and the short-term supply recovery pressure is greater.

Natural rubber producing areas in north and central Vietnam have entered the cutting season, and the south has been transitioning to a low-yield season. Private rubber plantations have stopped cutting since early January, while state-owned rubber plantations have not stopped cutting, but the output of rubber trees has dropped significantly. It is reported that natural rubber production areas in southern Vietnam have already reduced production by 50%. It is expected that production areas in Vietnam will stop cutting before the Spring Festival. Up to now, supplier delivery has been basically completed, and some factories have begun to accumulate inventory, but the inventory is still low.

In view of less and less raw material output, the factories are not in a hurry to ship, and the offer price of 3L glue is high. According to the factory, the processing cost of Vietnam 3L glue is roughly above $1560 / ton, and the domestic market is still trading at $1580 / ton. The profit margin is relatively narrow, and the factory's shipping intention is low. 

At present, production in Cambodia is normal, which may to some extent supply raw materials to Vietnam. It is expected that production in Cambodia will be cut in succession after February.

4. Domestic imports weakened, and inventory growth slowed down

Import aspect, data from the general administration of customs showed that China's natural rubber (including natural rubber latex, whether or not vulcanized; Smoke film; Technical classification natural rubber (TSNR). China imported 104,976.35 tons of Thai rubber in December, up 28.2% from the previous month and down 20.02% from the previous year. China imported 28,866.76 tons of Malaysian rubber in December, up 18.4% month-on-month and 8.93% year-on-year.

As for inventory, as of January 23, Shanghai futures exchange Shanghai glue stock futures are 243,976 tons (-10346), futures warehouse orders 236,160 tons (-2180), the inventory level is lower than previous years. The futures of no.20 glue stock are 48,405 tons (+10262), and the volume of futures warehouse orders is 19,455 tons (+6553). The warehouse orders are growing steadily. According to statistics, as of January 10, the total inventory of Qingdao port is 560,300 tons, the total inventory continues to recover slightly, but the growth rate is not as fast as in previous years.

5. The downstream construction was delayed, and the epidemic affected the demand

During the Spring Festival, most domestic tire enterprises arrange regular shutdown holiday. It is understood that the shutdown time is concentrated in the twelfth lunar month 20 (January 14) to the twelfth lunar month 23 (January 17), and the holiday days in 7-18 days. Affected by this, before the holiday (as of January 23) half steel tire sample enterprises weekly operating rate decreased to 24.48%, all steel tire sample enterprises weekly operating rate decreased to 30.05%. Survey shows that post-holiday tire enterprises to return to work time has been postponed. The specific time is still uncertain. 

Shandong Provincial Department of Human Resources and Social Security issued a document requiring all kinds of enterprises in the province not earlier than February 9 (the 15th day of the first month) before 24 days to resume work. According to the document required to calculate, the provincial tire enterprises will be delayed 7-10 days than the original plan. Meanwhile, after the festival (as of January 30) half steel tire sample enterprise operating rate is 10.18%, 14.30% lower than before the festival. The overall operating rate in January is 40.43%, 24.41% lower than the previous month. The operating rate of all steel tire sample enterprises was 12.06%, down 17.99% compared with the pre-holiday period. The overall operating rate in January was 46.21%, down 22.37% month-on-month.

Data show that before the festival tire enterprises actively reserve inventory. The overall inventory of manufacturers high, maintaining in 1.5 months or so turnover days. Weifang, Shandong province was affected by the impact of pre-holiday production restrictions. Its inventory reserves slightly lower than the same period in previous years, but the overall impact is not big.

In terms of agents, primary agents and part of the scale of the second generation, subject to the task pressure and large stock reserves, was basically in 1.5 to 2 months. Some businesses were in 2.5 months or so. Other dealers and stores before the festival get used to adapting the strategy that hold relatively flexible and low inventory. 

In previous years, during the first month of the 7th to 15th, the major tire manufacturers held a dealer conference, this year many manufacturers chose to delay, the specific time to be determined, tire channel delivery time node will be delayed. A number of areas released traffic control information. In addition to auto parts city, tire repair shop also announced the postponement of the opening of the entire logistics transport is expected to be delayed this year. 

On the export side, it is reported that some exporters will resume work next Monday (February 3). Whether the goods can be delivered normally needs to be concerned about transportation. Sources said that at 0:00 on January 30, Dongying expressway temporarily closed 7 toll gates. Qingdao will temporarily close the entrance and exit of 17 expressway toll stations within its jurisdiction from 0:00 on January 31. The above traffic control will have a direct impact on the tire market circulation.

6. The car market decline is obvious, waiting for the market to improve.

Reported on January 13 by China's Auto Industry Association, China association of automobile manufacturers released by the auto industry in 2019, as per the situation of economic operation in 2019, China's automobile production finished 25.721 million and 25.769 million respectively, fell by 7.5% and 8.2% respectively, compared to the production decline over the previous year expansion of 4.2 and 5.4% respectively. The sale and production volume continue topped the world's first.

Data show that in 2019, China's auto industry is facing greater pressure, with negative growth in both production and sales and major economic benefit indicators of the industry. From the monthly production and sales trends, China's automobile production and sales situation is gradually improving. In 2019, there were consecutive negative growth in each month, with a more significant decline in the first half of the year, and a gradual improvement in the second half.

Cui Dongshu, secretary-general of the all-china travel association, said in an interview that due to the outbreak in January and February, the decline in the car market could be more than 25 percent or even about 30 percent. However, Cui Dongshu also said that the market still has the possibility of achieving positive growth in March-December 2020 if the risks brought by special factors are not taken into account. Divided into two stages, after the epidemic situation improved, the car market will appear from negative to positive situation.

7. Market Forecasting 　

Macroscopically, at the beginning of the New Year, the outbreak of COVID-19 in China hit the market and the economy was greatly affected in the short term. In terms of supply and demand, production areas in southeast Asia have gradually stopped cutting since January, and the world has entered a period of low production. Raw material prices in production areas remain firm, which has certain support for rubber prices. Domestic producing areas have stopped cutting since the end of last year, and domestic rubber imports continue to weaken. 

In terms of inventory, Shanghai futures exchange rubber inventory fell to a low in recent years, inventory pressure greatly reduced. No. 20 plastic warehouse receipt is increasing steadily, and we pay attention to the delivery of the first contract. Qingdao bonded area rubber inventory growth rate than in previous years. 

On the demand side, during the Spring Festival holiday, the opening rate of domestic automobile tire factories dropped to the low point of the year. Due to the impact of the epidemic, the recovery time after the holiday will be delayed, and the transportation and logistics will be seriously affected. Domestic auto sales improved in December, but fell throughout the year, dealer inventory pressure remains, and sales will fall sharply in January and February. 

On the whole, since the production areas stopped cutting in February, the supply side entered into a seasonally tight state, but the demand side fell sharply due to the impact of the epidemic, so we paid attention to the recovery of the future market.

Shanghai glue main 2005 contract after waiting for a new round of bottom to participate in the new multiple orders, below the reference support range of 10,000-10,600 RMB/ton. Shanghai rubber 5-9 spread overall weak trend. Yunnan latex and Shanghai rubber 2005 contract base difference are relatively low. Shanghai rubber May contract and No. 20 rubber may contract spread from the high began to fall sharply.

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