Green shoots start to appear in natural rubber markets

Article originally published in the Jan/Feb issue of the European Rubber Journal

London - Natural rubber prices are starting to show signs of stability and even revival in the main trading centres of the Far East.

The fledgling recovery is being linked to talks among the main producer countries – Indonesia, Malaysia, Thailand – to take renewed steps to shore up prices.

Also encouraging were Association of Natural Rubber Producing Countries (ANRPC) figures showing a 5.2% year-on-year rise in global NR demand to 11.7 million tonnes for the first 10 months of 2018.

In its latest market review, issued 24 Dec, ANRPC reported that NR production increased 5.5% to 11.5 million tonnes during the period, leading to a shortfall of 228,000 tonnes.

But the champagne – like the many large stocks of NR – looks set to remain in storage for some time to come, amid concerns about the global economy and inventory levels in China.

“Commodities markets, such as oil and rubber markets, have been volatile and bearish during October 2018,” ANRPC secretary-general Nguyen Ngoc Bich said.

In the ANRPC review, the rubber association’s leader linked the weakened market situation to international trade tensions of the past six months.

On the other hand, the threat of new restrictions on NR supply has fired up buyers in Tokyo, where benchmark prices reached a two-month high at the start of this year.

Back month prices for RSS3 on the Tocom exchange continued a steady climb, from aroundYen162/kg on 1 Nov to reach levels as high as Yen181/kg in early January.

Back month contract prices for the recently introduced benchmark TSR20 grade increased 3.4% between 1 Nov 2018 and 8 Jan to reach a value of Yen152/kg.

On the Shanghai Futures Exchange (SHFE) in the first week of January,, the most heavily traded rubber future RU1905 increased to Yuan11,675 on 4 Jan – 1% higher than two months ago.

Elsewhere, average weekly prices for RSS4 in Kottayam, India were recorded at $178.38/100kg in early January – 2.4% higher than two months ago.

Stability was more the order of the day in Kuala Lumpur, where SMR20 reached $132.55/100kg on 4 Jan about level with the average week prices seen last November.

Rubber rising

New International Rubber Study Group data, based on IMF and other scenarios, forecasts that after a 3.2% rise to 29.30m tonnes in 2018, global rubber consumption will increase 2.5% to 30.03m tonnes this year.

World NR demand rose 4.9% to 13.87m tonnes in 2018 and is set to increase further by 2.6%, to 14.23m tonnes in 2019.

SR demand rose 1.7% to 15.43m tonnes in 2018 and, this year, is forecast to rise 2.4% to 15.80m tonnes.