The COVID-19 pandemic has once again become an important bearish factor in the outlook for economic growth
The menacing Aumechon BA.4 and BA.5 variants have once again made the epidemic situation in Europe and the United States severe.
On 1 July 2022, WHO Regional Director for Europe, Hans Kluge, warned that COVID-19 would spread at a "high level" in the summer as European countries lifted previously implemented social measures; It further warned that the virus will not disappear because countries stop looking for it, it is still spreading, it is still changing, it is still taking lives.
At present, the Omikejong BA.4 and BA.5 variants are spreading rapidly on the European continent. According to the latest WHO data, the 53 countries in the European region currently register nearly 500,000 cases per day. Austria, Cyprus, France, Germany, Greece, Luxembourg and Portugal are the countries with higher incidence.
Fauci, the chief infectious disease expert in the United States, also said that if the US Congress lacks support for epidemic prevention measures, the United States will encounter 100 million new crown cases and a large number of deaths this fall.
According to WHO's latest Weekly Report on the Global COVID-19 Pandemic, global COVID-19 cases have increased by 18% over the past week, the highest level since April, mainly due to infections from the more contagious Omiljung BA.4 and BA.5 variants. At present, the BA.4 and BA.5 variants together have accounted for 55% of all COVID-19 infection samples, of which BA.5 accounts for 43% and BA.4 accounts for 12%, which has replaced BA.2 as the world's leading strain.
On 12 July, WHO issued a statement on the 12th COVID-19 Emergency Committee meeting. The statement noted that the COVID-19 pandemic continues to constitute a "public health emergency of international concern". As of 12 July, the number of confirmed cases worldwide increased by 494537 from the previous day to 554290112. The number of deaths increased by 700 to 6351801.
The market is trading recession expectations
Crude oil fell sharply in a row, triggering consecutive sharp declines in major commodities.
OPEC expects global oil demand growth to slow to 2.7 million b/d in 2023, with supply continuing to tighten;
The Organization of the Petroleum Exporting Countries said in a monthly report on Tuesday that it expects demand to increase by 2.7 million bpd, or 2.7 percent, in 2023. It maintained its growth forecast for this year at 3.36 million b/d. Oil use has rebounded from the downturn triggered by the 2020 pandemic and will surpass 2019 levels this year. The outlook for 2023 suggests that supply pressures are likely to persist, with growth in non-OPEC output expected to lag behind demand growth due to lost production in Russia;
OPEC's demand forecast for 2023 is more optimistic than that of the International Energy Agency (IEA), another closely watched forecaster, and more optimistic than the initial opinion of OPEC delegates, which believes that high oil prices will slow demand growth significantly. OPEC said the forecast for 2023 was based on the assumption that the war in Ukraine would not escalate and that risks such as inflation would not have a serious impact on global economic growth.
OPEC maintained its global growth forecast at 3.5 percent this year and 3.2 percent growth in 2023, adding that uncertainty is skewed to the downside and that upside potential is "fairly limited."
Several energy agencies believe that the supply tension is bound to worsen. International Energy Agency Administrator Birol believes that the tightest time for energy supply is still ahead, and OPEC's preliminary outlook for 2023 believes that the supply shortage in the oil market has not eased.
Although the energy agency believes that supply is tight. Crude oil is still falling sharply in a row. At present, the crude oil market is affected by two directional forces, on the one hand, the overly tight spot market, on the other hand, the concerns about the demand side of the future market and the curbing of demand by high oil prices. The current market, which is not supply-led, is oil traders trading recession expectations. Crude oil fell sharply, possibly due to concerns about a global economic slowdown exacerbated by pandemic concerns. The bearish atmosphere in the commodity market is pervasive, and the epidemic has made people worried about the demand side, even overshadowing the impact of the tight supply side.
Bank of England Governor Bailey stressed that there was no "excuse" for returning inflation to the 2% target and was ready to take "strong" action to achieve that goal. The speech further reinforced the view that the Bank of England risked slowing economic growth, or even recession, to curb price increases. Inflation in the UK is currently 9.1% and is expected to be above 11% later this year.
IMF President Georgieva said the world was facing a crisis that could lead to a third post-war financial austerity crisis linked to higher interest rates and debt.
The main driver of the decline in oil prices is concerns about the economy. The market is trading recession expectations. The epidemic measures in some areas have also had a negative impact on the demand side. "Global economic activity has slowed, and central banks continue to say they need to slow down further to reduce inflation." According to UBS Asset Management's latest Panoramic Outlook 2022 Mid-Year Report, global growth panic will be the economic factor most likely to be priced by market participants in the second half of 2022.
Rubber supply expected to be normal, increased by 2%-4%
In May 2022, the rubber output was 851.9 thousand tons, 5.39% year-on-year, 4.90% month-on-month, and a total of 4295 thousand tons, a cumulative year-on-year increase of 1.15%.
In May 2022, Thailand produced 334.5 thousand tons, 5.49% year-on-year, -2.96% month-on-month, and a total of 1892 thousand tons, a cumulative year-on-year increase of 3.74%.
In May 2022, Indonesia's output was 237.4 thousand tons, 0.42% year-on-year, -7.77% month-on-month, accumulating 1294 thousand tons, a cumulative year-on-year increase of 1.52%.
In May 2022, Malay production was 28 thousand tons, -0.71% year-on-year, -9.68% month-on-month, and a total of 166 thousand tons, a cumulative year-on-year -9.25%.
In May 2022, Vietnam produced 90 thousand tons, 50.00% year-on-year, 50.00% month-on-month, and a total of 277 thousand tons, a cumulative year-on-year -27.11%.
In May 2022, rubber exports were 778.1 thousand tons, 11.16% year-on-year, -7.20% month-on-month, and a total of 4171 thousand tons, a cumulative year-on-year increase of 3.60%.
In May 2022, Thailand exported 330.5 thousand tons, 5.62% year-on-year, -4.59% month-on-month, and a total of 1796 thousand tons, a cumulative year-on-year increase of 4.88%.
In May 2022, Indonesia exported 189.6 thousand tons, 9.03% year-on-year, -26.60% month-on-month, and a total of 1032 thousand tons, a cumulative year-on-year -2.51%.
In May 2022, Malay exported 91.8 thousand tons, up from 18.30% year-on-year, -6.23% month-on-month, and 446 thousand tons cumulatively, with a cumulative year-on-year increase of -4.37%.
In May 2022, Vietnam exported 90.8 thousand tons, an increase of 13.36% year-on-year, 18.08% month-on-month, and a total of 560 thousand tons, a cumulative year-on-year increase of 5.12%.
In May 2022, rubber consumption was 784.2 thousand tons, 3.96% year-on-year, -1.52% month-on-month, and 3881 thousand tons, a cumulative year-on-year -2.67%.
In May 2022, China's consumption was 489 thousand tons, -1.01% year-on-year, 2.30% month-on-month, and a total of 2303 thousand tons, a cumulative year-on-year -6.77%.
Rubber demand is expected to marginally improve on the Chinese side
Foreign demand is not clear
Heavy-duty truck sales are expected to turn marginally better in the second half of the year
Heavy-duty truck sales in June 2022 were 53,000 units, down 66% year-on-year, and in the first half of 2022, the cumulative sales of heavy-duty trucks in each month were 378,000 units, down 64% year-on-year, both market sales and year-on-year hit a new low in the same period of recent years.
Factors affecting the decline in heavy-duty truck sales: the epidemic, economic downturn, rising oil prices, the impact of second-hand cars and many other factors, the cumulative sales volume and year-on-year hit a new low in the same period in recent years.
The spread of the epidemic in the past 22 years, especially in Shanghai, has led to a serious reduction in the demand for heavy trucks in and around Shanghai and the Yangtze River Delta region, which has always been a key sales market for heavy trucks in the mainland.
In the past 22 years, due to the impact of the epidemic and the international environment and other factors, investment and consumption have shrunk, corporate efficiency has declined, social supply has decreased significantly, and the demand for heavy trucks in various industries has decreased.
Third, oil prices are rising and transportation costs are increasing.
Looking ahead, we expect heavy-duty truck sales to be expected to range from 850,000 to 1.2 million units in 22 years.
Heavy-duty truck sales from 2017 to 2021 were 111,114,117,161,390,000 units, respectively.
We forecast the 22-year forecast for heavy-duty truck sales to be between about 850,000 and 1.2 million units.
Impact on rubber: Reduced demand for heavy-duty tires. Marginal improvement in the second half of 22 years.
Rubber tire exports: the good is about to show
In Europe, on May 4, 2022, the General Court of Justice of the European Union issued a first-instance ruling: the European Commission's anti-dumping and countervailing duty order on Huaka bus tires was revoked, and the European Commission and its supporters should bear the legal costs. According to the relevant law, if the Commission abandons the appeal after two months (July 2022), the decision will come into force.
The abolition of the "double reverse" tax rate means that some tire companies that were difficult to export to the EU in previous years due to the high "double reverse tax" will regain export opportunities, and exports to the EU are expected to increase. Bullish or soon to be shown.
On the US side, on the evening of June 14, 22, the US White House said that the US is ready to fight inflation and is discussing some "irresponsible" tariffs imposed by former President Trump. This has heated up expectations of tariff relief again. Bullish or soon to be shown.
According to the 301 investigation, the United States imposed a 25% tariff on goods imported from China in two batches from July and August 2018, which will end on July 6 and August 23, 2022, respectively. Of the two batches of tariffed products, only aerated rubber tires for aircraft were on the $34 billion list. The supplementary $200 billion list contains more than 100 tariff codes for synthetic rubber raw materials, tires, tapes and other rubber products, covering almost all common tire products, including passenger car tires, truck and bus tires, agricultural tires, construction machinery tires, etc., with an additional 25% tariff (this part of the 25% tariff is expected to be reduced).
Rubber: Why fall again? Can you read the bottom?
Why did rubber fall again?
We understand that there is nothing particularly negative about the rubber itself. Mainly affected by the general decline in commodities. Because of concerns about the recurrence of the epidemic in the United States and the expectation of recession.
Can rubber bottom out?
From a rubber fundamental point of view, it is easy to get out of the annual low in July-September. Thailand's typhoon season from July to October was prone to flooding that affected supplies, and it rose sharply in 2016. In addition, RU2209 warehouse orders are also easy to rise after leaving the warehouse. October-November is the traditional season for Chinese farmers to hoard glue to rise. Demand in the second half of the year domestic expectation marginal improvement, foreign recession expectations, market expectations themselves are changeable, not very clear.
Therefore, the single variety of rubber is bullish, but macro expectations are down with most industrial products. The forces cancel each other out, and it is difficult to form a resonant rise. Long rubber needs to consider hedging macro risks.
We believe that the situation of rubber in 2022 is more complicated than in previous years, and it is generally appropriate to be conservative.
Strategically, it is recommended to buy RU2209 short NR2209, or buy RU2209 empty chemicals, (after September to ru2301, NR every month for month). The main consideration is to hedge the macro downside risk. When the market sentiment is stable, consider adding a unilateral short long RU2301 strategy.
This article originates from the Minmetals Futures microservice