Introduction: During the Spring Festival holiday, the prices of SICOM and TOCOM first rose and then dropped. The cost bolstered the natural rubber price due to the slight increase in feedstock price in Thailand. However, the overall bearish macro environment caused the natural rubber price to stop rising and start falling. After the holiday, the price of natural rubber is likely to be range-bound. Players should focus on the influence of macro environment changes on the co-movement with the commodity.

Prices of overseas natural rubber futures rose first and then fell.

The settlement prices of SHFE dominant contract on the last trading day during the Spring Festival holiday were mixed compared with those on the last trading day before the holiday. As of February 4 (the last trading day during the Spring Festival holiday), the settlement price of the Singapore TSR20 2504 dominant contract was 194.3 ct./kg, down 4 ct./kg or 2.02% from the last trading day before the holiday. The closing price of the TOCOM 2506 dominant contract was JPY 382.2/kg, up JPY 3.6/kg or 0.95% from the last trading day before the holiday. During the Spring Festival holiday, the cost bolstered the natural rubber price to increase as the purchase price of feedstock in Thailand continued to rise. However, due to the fact that US President Trump signed an executive order on February 1, announcing a 25% tariff on imports from Canada and Mexico, and a 10% tariff on imports from China, the price of natural rubber in the overseas market stopped rising and dropped at the end of the holiday.

The purchase price of feedstock in the main producing areas in Thailand continued to rise.

From late January to early February, as the main producing areas in Northeastern Thailand and Vietnam gradually entered the tapping-suspension period, the global natural rubber output was transitioning from the production peak season to the low-output season. The gradual reduction of feedstock output and the stockpiling of rubber processing plants before the tapping-suspension period supported the purchase price of feedstock. As of February 4, the purchase price of field latex in Thailand was THB 67.7/kg, up THB 1.2/kg or 1.8% from January 27; that of cup lump was THB 61.3/kg or 1.07% from January 27; that of SSR was THB 72.05/kg, up THB 0.97/kg or 1.32%; that of sheet rubber was THB 72.05/kg, up THB 0.19/kg or 0.26%. The purchase price of feedstock continued to rise, especially the price of cup lump, increasing by 9.95 THB/kg or 19.38% YoY. The cost remained high, supporting the mainstream natural rubber price.

Macroeconomic risks exacerbated players’ sentiment fluctuations.

On February 1, US President Trump signed an executive order, announcing a 25% tariff on imports from Canada and Mexico, and a 10% tariff on imports from China. After that, Mexico declared it would impose tariffs on products imported from the US. Currently, the external macro environment such as trade conflict has disturbed players’ sentiment. The mainstream price of commodities declined, affecting the mainstream price of overseas natural rubber futures. Since the opening on February 2, both prices of SICOM and TOCOM have shown a downward trend from high levels.

The natural rubber price may be range-bound after the holiday

As seen from the market after the holiday, the natural rubber price is likely to remain range-bound. For fundamentals, during the holiday, the feedstock price in Thailand fluctuated upwards, lending support to natural rubber price from the bottom. Meanwhile, for inventory, the arrivals of cargo at ports in the short term will not be concentrated. The inventory will hardly see improvements, bolstering the natural rubber price. However, although downstream players will gradually return to the market after the holiday and the trading atmosphere may warm up, the rigid demand of buyers is hard to increase significantly in the short term. At the same time, there are still uncertainties in macro policies. Easily affected by the macro environment, the natural rubber price is expected to remain range-bound in the short run. Players should focus on the influence of macro environment changes on the co-movement with the commodity.