Market Review

The average price of RMB-denominated natural rubber in the spot market trended downward this week. At the beginning of the week, due to a significant YoY increase in the import volume of natural rubber and synthetic rubber from January to February, the market’s expectations for the release of commodity liquidity in the circulation end rose. Coupled with a slight increase in port inventories, natural rubber prices weakened under pressure. However, the pace of inventory accumulation was slower than expected. As a result, after continuous weakening, the price fluctuated at the bottom. In terms of spot trading, new orders of downstream product enterprises performed poorly. Most enterprises mainly made procurement based on rigid demand, and the market trading atmosphere was average. The trading volume in the mixed rubber market was acceptable, and most of the transactions were related to the rollover of arbitrage positions for contract month changes.

Market Forecast

Forecast: China’s natural rubber market may be range-bound next week. In terms of the fundamentals, due to the global low-production season, the prices of feedstock remain at a high level, and the cost support persists. However, with normal phenological conditions, the expectations for the start of rubber tapping in the producing areas such as Yunnan and northeastern Thailand have increased. It is expected that rubber tapping may commence by the end of March. In terms of the demand side, currently, the follow-up of new orders in the product manufacturing segment is limited. At the same time, it is relatively difficult to achieve transactions at high prices. Most tire enterprises mainly maintain procurement based on rigid demand and replenish their inventories when prices are low. Thus, in the short term, the demand side lacks effective support for the natural rubber price. In addition, the inventory at the circulation end has increased slightly, but the growth rate is still lower than expected. As a result, in the short run, there is a lack of obvious trend guidance, and the natural rubber market may remain range-bound. It is estimated that the weekly average price of SCRWF in Shanghai may be RMB 16,800/mt, and its mainstream prices may be in the range of RMB 16,500-17,300/mt. Market players should pay attention to the phenological changes in the producing areas and the inventory status at China’s ports.

Inventory: Due to a significant YoY increase in the import volume of natural rubber and synthetic rubber from January to February, the market’s expectations for the release of commodity liquidity in the circulation end rose. Coupled with a slight increase in port inventories, natural rubber prices weakened under pressure. Yet, the actual pace of inventory accumulation in the market may still fall short of expectations, so the downward room for the price is limited.

Cost: During the global low-production period, the release of feedstock field latex is limited, resulting in little pressure on the output of new natural rubber. Although the feedstock price has been adjusted to some extent, it remains relatively high overall. Thus, the cost side still bolsters the price of natural rubber from the bottom.