To address the growing problem of microplastic pollution, the European Parliament has formally adopted a new regulation, fully endorsing the text approved by the Council of the European Union. This regulation establishes legally binding obligations for the handling of plastic pellets throughout the supply chain and explicitly brings recycling and recovery processes under regulatory scope, with the core goal of achieving "zero plastic pellet loss."

 — 1 —Legislative Background and Urgency

Plastic pellets are the third-largest source of microplastics unintentionally released into the environment. These pellets persist in the environment, exhibit cross-border mobility, pose severe threats to ecosystems and biodiversity, and may have potential adverse effects on human health through air and the food chain. Although the EU previously had voluntary industry commitments such as Operation Clean Sweep®, their implementation effectiveness has been unsatisfactory. Meanwhile, inconsistent measures among member states may hinder the operation of the internal market. Therefore, formulating a unified mandatory EU-wide regulation has become particularly urgent. A major incident on December 8, 2023, directly contributed to the refinement of the regulation. At that time, a cargo ship lost six containers in deep water more than 80 kilometers off the coast of Galicia, Spain. As a direct response to this incident, the EU expanded the definition of "plastic pellets" in the new regulation to explicitly cover various forms such as powders, cylinders, beads, and flakes, ensuring a sufficiently broad regulatory scope. — 2 — Scope of Application and Core Definitions

Scope of application includes: - Economic operators: Entities that handled more than 5 tons of plastic pellets in the previous calendar year, including recycling producers. - Cleaning facility operators: Economic operators running facilities for cleaning plastic pellet containers and tanks. - Transporters: EU and non-EU carriers transporting plastic pellets within the EU by road, rail, or inland waterways. - Maritime transport stakeholders: Shippers, operators, agents, and masters using freight containers to transport plastic pellets, departing from or calling at ports of member states. Key definitions: - Plastic pellets: Polymer-containing materials of any shape, form, or size, including virgin and recycled sources, whether derived from biomass or designed to be biodegradable. This includes pellets, flakes, resins, cylinders, beads, powders, and other forms. - Leakage: The one-time or prolonged escape of plastic pellets from primary containers within facility boundaries or transport vehicles. - Loss: The escape of plastic pellets from facility boundaries or transport vehicles into the environment at any stage of the supply chain. — 3 — Core Obligations and Tiered Compliance Mechanism

To balance environmental goals with enterprises’ compliance burdens, the regulation establishes a tiered compliance mechanism based on enterprise size and annual handling volume: - Micro-enterprises, regardless of their handling volume, only need to submit a self-declaration of conformity. - All types of enterprises with an annual handling volume below 1,500 tons also apply the self-declaration system but must update it every five years. - For enterprises with an annual handling volume of 1,500 tons or more, the requirements are stricter: large enterprises must obtain independent third-party certification every three years, and medium-sized enterprises every four years. If small enterprises exceed this threshold, after obtaining an initial certificate valid for five years, they may subsequently choose to renew the certification or demonstrate continuous compliance by updating their risk management plan and submitting a self-declaration. This provision provides flexibility for small enterprises (including small recycling enterprises) and reduces their administrative burden. Meanwhile, the regulation requires medium and large enterprises to conduct annual internal assessments and establish training programs targeting employees’ specific responsibilities to ensure effective implementation of the regulatory requirements. EU member states must formulate effective, proportionate, and dissuasive penalty rules. For the most serious violations, administrative fines can be as high as 3% of the legal entity’s EU turnover in the previous fiscal year, and criminal penalties may also be imposed. The regulation will enter into force on the 20th day after its publication. Most provisions will apply 24 months after entry into force, and maritime transport-related provisions will apply 36 months after entry into force. (Source: EUR-Lex.europa.eu)

Since early November, natural rubber prices have fallen consecutively, sharply offsetting the previous bullish drivers from limited RU warehouse receipts and rainfall in Hainan. Below is an analysis of the operational logic behind the recent market trend based on the supply and demand fundamentals of rubber. ### Thai Major Production Areas In early October, rainfall eased in northeastern and northern Thailand, allowing normal tapping activities. Despite intermittent precipitation disrupting operations in southern Thailand, expectations of increased supply dragged down overall raw material prices significantly. In late October, typhoons brought heavy rains to southern production areas, hindering raw material supply. However, rainfall in Thailand has been minimal since November, with weather returning to normal. ### Domestic Production Areas In Hainan, frequent typhoons and precipitation have significantly impacted tapping operations recently, slowing the pace of new rubber supply and highlighting the "weak supply during peak production season" feature. Pressured by sustained processing losses earlier, local processors showed low willingness to purchase raw materials, leading to a decline in glue purchase prices. Nevertheless, with the recovery of midstream and downstream orders and marginal improvements in processing profits, processors' demand for raw material restocking has increased, driving glue purchase prices to stabilize and rebound. Plagued by weather disruptions for months, Hainan's raw material output has been constrained, severely suppressing the operating rates of local concentrated latex processors. A reduction in Hainan's natural rubber production this year is inevitable. However, in the spot market, weak downstream demand has capped upward price potential, leaving local processors with meager profit margins and increased operational difficulties, further exacerbating their caution in raw material procurement and production. Yunnan has enjoyed favorable weather conditions, ensuring normal raw material supply. Yet, persistently high processing costs have led processors to suppress raw material purchase prices, resulting in a narrow downward trend. ### Downstream Demand The weekly capacity utilization rate of all-steel tire sample enterprises stood at 65.34%, down 0.24% month-on-month but up 3.2% year-on-year. For semi-steel tire sample enterprises, the rate was 73.41%, a decrease of 0.26% month-on-month and 5.92% year-on-year. Weekly inventory days for all-steel tires were 39.01, down 1.33 days month-on-month and 0.2 days year-on-year. Semi-steel tire inventory days reached 44.82, decreasing by 0.44 days month-on-month but increasing by 8.33 days year-on-year. In September, China produced 103.487 million rubber tire casings, up 0.5% month-on-month and 7.1% year-on-year. From January to September, cumulative tire exports reached 534.91 million units, a year-on-year increase of 5.4%. While September's export volume declined month-on-month, possibly affected by seasonal demand fluctuations, it still rose year-on-year. The steady growth in cumulative exports in the first nine months indicates the solid fundamentals of China's tire exports. In the terminal automotive market, China's automobile production in September was 3.276 million units, up 16.38% month-on-month and 17.17% year-on-year. Cumulative production from January to September reached 24.303 million units, a year-on-year increase of 13.24%. Auto consumption has remained strong this year, supported by the continued effectiveness of the car replacement policy—with some suspended regions resuming implementation. Positive progress has been made in addressing industry "involution," local auto shows have been popular, and enterprises have launched new models intensively. The auto market has maintained a sound momentum, with monthly production and sales growth exceeding 10% year-on-year for five consecutive months. New growth drivers are accelerating, and foreign trade remains resilient. However, the monthly auto inventory warning index, though falling to 52.50 in October (down 1.90 month-on-month), still remains above the boom-bust line, raising doubts about the circulation speed of the auto industry. ### Inventory Total inventories of natural rubber (including bonded and general trade) in Qingdao reached 447,700 tons, an increase of 15,400 tons or 3.57% month-on-month. Bonded zone inventories decreased by 0.58% to 68,300 tons, while general trade inventories rose by 4.36% to 379,400 tons. For sample bonded warehouses in Qingdao, the warehousing rate increased by 1.79 percentage points and the outbound rate by 0.79 percentage points. For general trade warehouses, the warehousing rate rose by 4.30 percentage points, while the outbound rate fell by 1.49 percentage points. Qingdao shifted from inventory destocking to significant accumulation this cycle, mainly due to a nearly 16,000-ton increase in general trade inventories—far exceeding expectations. Tire factories had sufficient inventories from previous restocking, and after rubber prices rebounded, downstream acceptance of high-priced raw materials was low, leading to cautious purchasing attitudes and significantly lower-than-expected outbound volumes from general trade warehouses. In the bonded zone, increased overseas arrivals this cycle slowed the destocking pace. The correction in natural rubber futures prices since last Friday was mainly driven by market rumors of general trade inventory accumulation, worsening bearish sentiment toward demand. ### Summary and Outlook Overall, global natural rubber production areas are in the tapping season, with normal weather in major Southeast Asian producing regions. Processors in Yunnan have stable procurement demand, and some price declines are expected, with variations in purchase prices across regions. Hainan continues to experience heavy rainfall, with waterlogging in some areas severely hindering tapping operations and causing tight supply of fresh glue, leaving local processors with limited raw material procurement volumes. On the demand side, as of early November, market transactions are sparse, with most participants digesting previous inventories and adopting a cautious restocking stance. As temperatures drop, demand in the northern all-steel tire replacement market will further weaken. Additionally, with the gradual availability of semi-steel snow tires, market purchasing enthusiasm will slow, with most activities focused on fulfilling existing orders and few new raw material purchase price transactions reported. The unexpected inventory accumulation in Qingdao's general trade sector is a key factor behind the recent sharp correction in rubber prices. Looking ahead, the Federal Reserve's hawkish stance on the prospect of a December interest rate cut has weakened macro sentiment. Combined with the recent deterioration in fundamentals, rubber prices will face short-term pressure. Future attention should be paid to raw material output during the peak production season in major producing regions and changes in macroeconomic conditions. If raw material supply increases smoothly, rubber prices may have further downward room.

Rizhao Shenghai Rubber & Plastic Co, Ltd. (Former Shandong Haosheng).the company covers an area of3867 sauare meters, construction are a of 6960 sauare meters.the annual comorehensive oroduction capacity of 250 milion.The company mainly develops, produces and sells a variety of handrail boxes (control boxes) assemblies forconstruction machinery, natural rubber, silicone rubber, fluoroelastomer, EPDM, nitrile rubber products, plasticproducts and polymer products.

In 2018, the company passed the lATF16949:2016 quality management system certification, and the rubbeseals passed the national quality supervision and inspection license. In 2019, the company successfully registeredthetwotrademarksof"Sapler"and "SAPRTE".which enabledthecompany tostepu ptoanewlevelof development in the direction of brandingandspecialization.In2020,the1S014001:2015 environmental management system certification.

In recent years, with the joint efforts of all employees, the company has achieved rapid development andbecome a "little giant" of the industry' strength faction. In December 2018, the company was successfully listed inthe Qilu Equity Exchange Center (equity code: 303289). in 2018, the company was included in the municipal scaleenterprise. In 2019, the company was rated as "2019 Advanced Unit for Tax Payment" and "2019 Advanced Unitfor New and Old Kinetic Energy Conversion'. in 2021, it was rated as "Science and Technology Small and Medium-sized Enterprise" by the Science and Technology Department of Shandong Province, and was awarded the "Town.level Excellent Scientific and Technological innovation Enterprise" by the town government.