Introduction: In Q1 2025, the prices in the natural rubber market soared initially but then declined, with the average price showing a QoQ decrease. Looking ahead to Q2, as the producing areas enter the tapping season, the high prices of feedstock boost the tappers’ enthusiasm for rubber tapping, dampening market sentiment. The expected decline in demand is putting pressure on the price of natural rubber. However, given the seasonal low in imports, the inventory is projected to be lower than in the same period in 2024, which may still provide some support to natural rubber prices. It is anticipated that the price center of natural rubber may still decline in Q2 2025.

In Q1 2025, natural rubber prices surged and then fell, fluctuating in a high range.

The average price of SCRWF in Shanghai was RMB 16,766.10/mt, down 1.93% QoQ but up 28.00% YoY. Meanwhile, the average price of STR20 mixed rubber in Shandong was RMB 16,662.29/mt, down 0.01% QoQ but up 31.62% YoY. In Q1 2025, the highest point of the natural rubber market price occurred after the Spring Festival holiday (from late February to early March). At that time, the price of SCRWF in Shanghai reached RMB 17,575/mt, and the price of STR20 mixed rubber reached RMB 17,475/mt. The lowest point of the natural rubber market price occurred on January 7. At that time, the price of SCRWF in Shanghai was RMB 15,900/mt, and the price of STR20 mixed rubber in Shandong was RMB 15,800/mt.

Review: Seasonal decline in supply from producing areas, with consistently strong support from the cost side.

In Q1 2025, the global output of natural rubber transitioned into the seasonal off-season. As seen from Thailand’s main producing areas, the northeastern producing area gradually reduced production starting from H1 January, and the southern producing area entered the production reduction period in February. The producing area in Vietnam began to gradually reduce production in late January. Although the production reduction and tapping suspension periods in the main overseas producing areas were all delayed, the supply pressure in these areas showed a marginal decrease in Q1 2025. With the seasonal decline in production in these areas, the purchase prices of feedstock in the producing areas remained at a relatively high level. Taking the feedstock purchase prices in Thailand’s producing areas as an example, as of March 28, the purchase price of field latex was THB 68.5/kg. Although it was lower than the same period in 2024, it was still at a relatively high level compared to the past five years. The purchase price of cup lump was THB 61.8/kg, which was at the highest level in the past five years. The high purchase prices of feedstock have provided strong support from the cost side. Overall, in Q1 2025, the supply and production costs in the producing areas have provided strong support for natural rubber prices.

Review: Limited demand improvement, with downstream enterprises making purchases out of rigid demand when prices are low.

From the perspective of tire products, which is a major downstream consumption area of natural rubber, in Q1 2025, the production of tire enterprises basically conformed to the seasonal pattern. Affected by the Spring Festival holiday, the operating rate from January to February showed a downward trend. After the holiday, enterprises gradually resumed production. According to SCI, in March, the operating rate of all-steel tire enterprises in Shandong was 68.75%, up 14.57% MoM but down 1.15% YoY. That of semi-steel tire enterprises was 82.64%, up 16.64% MoM and 2.99% YoY. The operating rate had basically recovered to the level of the same period in 2024. In terms of feedstock demand, due to the fluctuating trend of natural rubber market prices within a high range, tire enterprises made feedstock purchases out of rigid demand when prices were low. In terms of non-tire products, most enterprises resumed production successively after the Lantern Festival. There was not much feedstock stockpiling before the holiday, and new orders were sluggish. The high costs could not be smoothly passed on downstream, so there was a cautious attitude towards purchasing feedstock. Overall, the demand for natural rubber in Q1 2025 increased only marginally, failing to provide sufficient support for natural rubber prices.

Review: Inventories at main ports increased, yet the absolute inventory levels were lower than those of the same period in 2024.

In Q1 2025, the inventory of natural rubber in main ports showed a trend of accumulation. According to SCI, as of the end of March, the inventory of natural rubber in the sample warehouses in Qingdao was 476.4kt, up 139.1kt or 41.24% from the end of 2024. However, it decreased by 77.3kt or 13.96% compared with 553.7kt in the same period in 2024. Due to the Spring Festival holiday, the market expected that the inventory at China’s ports would continue to accumulate after the holiday. In reality, the upstream factories postponed the shipping schedules, and the downstream factories concentrated on picking up the goods after the holiday, resulting in a slow accumulation of natural rubber inventory in Qingdao in February. In March, at the beginning of the month, the import volume of natural rubber and synthetic rubber from January to February witnessed a significant YoY increase, rising by 23.29%. As a result, the market’s expectations for the release of the liquidity of goods sources at the circulation end escalated. There were also doubts about the slow pace of inventory accumulation, which accelerated the decline in the market price of natural rubber. With the release of the customs data in late March, the actual incremental import of natural rubber (a YoY increase of 19.18%) fell short of expectations. Therefore, the price of natural rubber rebounded from the bottom. Overall, the inventory of natural rubber showed a trend of accumulation in Q1 2025, which was in line with the seasonal performance. The absolute inventory level was lower than that of the same period in 2024, providing support for the spot price.

In Q2, the natural rubber market may see wide-range swings, with an average price lower than in Q1 2025.

From the supply side, the phenology in domestic and overseas producing areas is normal currently. The producing area in Yunnan, China, gradually started trial tapping in late March. The market anticipates that the producing area in Hainan may commence normal tapping successively after the Qingming Festival. Overseas, the main producing areas in Thailand, Vietnam, and Malaysia may enter the tapping season from April to May. In Q2, domestic and overseas producing areas may gradually start tapping. Coupled with the high-priced feedstock stimulating the tapping enthusiasm of rubber farmers, under normal weather conditions, there is an expectation of increased natural rubber production in Q2, which may suppress the upside of natural rubber prices. However, the actual output is basically at a low level throughout the year. The pressure on domestic arrivals at ports is relatively limited, and the import volume shows a downward trend. The inventory may be lower than that of the same period in 2024. Overall, the supply pressure is expected to be limited.

From the demand side, in the tire market, the demand in the end-user market for all-steel tires is weak. Overall, there are more trucks than goods, resulting in limited consumption of all-steel tires. In Q2, the production and sales of tire enterprises are expected to slow down, and there is an expectation of finished product inventory accumulation. Additionally, due to the difficulty in passing on the high-priced feedstock downstream, tire enterprises are under high production cost pressure, which may somewhat impede the production and operating pace. For non-tire products, new orders are underperforming, and the high costs cannot be smoothly passed on downstream. It is expected that in Q2, the procurement of feedstock will continue to follow the pace of making purchases out of rigid demand when prices are low, with no intention of excessive feedstock inventory stockpiling. Therefore, the demand for natural rubber in Q2 2025 is expected to decline, putting pressure on natural rubber prices.

Overall, in Q2, the natural rubber market may show a pattern of both supply and demand declining in the short term, and the supply-demand contradiction is not prominent. The pressure of domestic spot inventory accumulation is lower than the level of the same period last year, which supports the average spot price. However, with normal phenology this year, there is a strong expectation that the producing areas may start tapping as normal. Stimulated by high-priced feedstock, the pace of feedstock volume increase may be faster than in the same period in previous years, undermining market sentiment. Therefore, it is expected that the market price may show a wide-range fluctuating trend, with the average price lower than that in Q1 2025.

Risk warning: Market players should pay close attention to the climate conditions in domestic and overseas producing areas in the early stage of tapping and the impact of external macro policies on the commodity co-movement.