Natural rubber

Market Intelligence on Natural Rubber: Recent Developments

I. Price Trends
1. Domestic Market:
- The main contract price of natural rubber on the Shanghai Futures Exchange (SHFE) has recently shown an upward trend with volatility, registering a weekly increase of approximately 2.5%, primarily driven by expectations of tightened supply.
- Spot Market: Quotations for Yunnan Whole Latex Rubber range from 14,800 to 15,200 RMB/ton, up 3% from the beginning of the month; Thai STR20 mixed rubber quotations range from 1,850 to 1,900 USD/ton (CFR China), up approximately 2%.

2. International Market:
- Natural rubber futures prices on the Tokyo Commodity Exchange (TOCOM) have risen in sync, with a weekly increase of approximately 1.8%, supported by the depreciation of the Japanese yen and expectations of a recovery in Asian demand.
- Raw material cup latex purchase prices in major Southeast Asian producing regions (Thailand, Indonesia, Malaysia) have been slightly increased; Thai cup latex prices rose 2.3% week-on-week to 52.5 Thai Baht/kg.

II. Supply-Side Developments
1. Weather in Major Producing Regions:
- The onset of the rainy season in southern Thailand and parts of Malaysia has hindered tapping operations, leading to a phased reduction in raw material output.
- The Vietnamese producing region has entered a tapping suspension period, with supply expected to resume after March 2024.

2. Inventory Changes:
- Bonded natural rubber inventory in the Qingdao region decreased by 1.2% week-on-week to 223,000 tons, while general trade inventory decreased by 0.8% to 516,000 tons, indicating an accelerated pace of destocking.
- Warehouse receipt inventory for natural rubber on the SHFE remains at low levels, down 15% year-on-year.

3. Import Data:
- China's natural rubber imports in November were approximately 580,000 tons, down 5% month-on-month and 8% year-on-year, primarily due to seasonal declines in overseas supply.

III. Demand-Side Developments
1. Tire Industry:
- China's semi-steel tire operating rate remains at a high level (approximately 78%), while the operating rate for all-steel tires has recovered to 65%. Pre-holiday stocking needs by enterprises are supporting raw material procurement.
- Overseas Orders: Restocking demand from tire manufacturers in Europe and the US has been released, with China's tire exports in November up 10% year-on-year, driving natural rubber demand.

2. Substitute Market:
- Prices for synthetic rubber (such as SBR and BR) have risen due to increased crude oil costs, narrowing the price gap between natural and synthetic rubber. This has led some downstream users to switch to natural rubber as a substitute.

IV. Macroeconomic and Policy Impacts
1. Exchange Rate Fluctuations:
- The strengthening of the Thai Baht and Indonesian Rupiah against the US dollar has increased export costs in Southeast Asia, supporting international rubber prices.
2. Trade Policy:
- China maintains low import tariffs on natural rubber from countries such as Thailand and Malaysia, but expectations of anti-dumping investigations are rising, raising market concerns about supply stability.
3. Geopolitics:
- The Red Sea shipping crisis has led to increased freight rates on routes from Southeast Asia to Europe, prompting some tire manufacturers to stock up in advance, resulting in a short-term concentrated release of demand.

V. Analytical Assessment
1. Short-Term Drivers:
- Supply Side: Weather disturbances in major producing regions combined with inventory destocking support a firm trend in rubber prices.
- Demand Side: High operating rates in the tire industry and pre-holiday stocking needs provide support, although high prices may inhibit the pace of procurement.
2. Medium-Term Risks:
- Supply pressure may re-emerge as producing regions in Thailand and Vietnam gradually resume supply after January 2024.
- Weak economic data in Europe and the US could drag down tire export demand.

VI. Price Forecast
1. Short-Term (1-2 Weeks):
- The main contract price of domestic natural rubber is expected to range between 14,800 and 15,500 RMB/ton. Spot prices will follow market fluctuations, but the upside is expected to be limited.
2. Medium-Term (1-3 Months):
- If abnormal weather in major producing regions persists or inventory continues to deplete, rubber prices may break through 16,000 RMB/ton; conversely, following supply recovery, prices may fall back to the 14,000-14,500 RMB/ton range.
3. Long-Term (6+ Months):
- Attention must be paid to the suppression of tire demand by global economic slowdown and the increase in supply resulting from the expansion of natural rubber planting areas. The long-term price center is expected to shift downward.