Natural rubber prices hit by Covid resurgence, soft demand

Kuala Lumpur – A series of factors, including a new Covid outbreak in China and automotive supply-chain disruptions in the US, negatively impacted natural rubber prices in the first half of June, the Association of Natural Rubber Producing Countries has reported.

More than 100 cases of 'Delta' variant Covid infections were detected in Guangzhou City, the capital of the southern Chinese province of Guangdong.

The outbreak led to partial lockdowns in the province, according to the ANRPC's rubber market intelligence report, issued 18 June.

As a result, operations were suspended at the Yantian container terminal which, said the association, is considered to be "pivotal" to the country’s manufacturing and trading activities.

The development, it said, impacted an “already constrained shipping logistics and port operations” in China, with knock-on effects on trade.

In addition, a new wave Covid infections in the ASEAN trgion, as well as higher raw materials costs and the global microchip shortage, further slowed down production in China. 

Industrial manufacturing in China fell 8.8% year-over-year in May 2021 compared to a growth of 9.8% posted in April, said ANRPC, citing 16 June data by the National Bureau of Statistics. 

Also contributing to the downtrend was a slowdown within the US tire sector, which was hit by global logistics disruptions and delays. 

“Increases in freight and raw material costs, delays at ports, and high inflation are affecting profit margins in the manufacturing sector... and the tire manufacturing industry is no exception,” the report noted.

Furthermore, with the ending of the wintering season in all major producing countries, harvesting has resumed despite the constraints caused by the pandemic-related restrictions.

As a result, rubber supply “markedly improved” during the months of May and June, negatively affecting prices. 

Other key factors, said ANRPC, included US moves to impose anti-dumping tariffs on Asia-based tire makers and a Chinese government’ intervention to tackle soaring commodity prices.

ERJ's analysis shows that natural rubber prices fell noticeably across Far East futures and physical markets during the two weeks to 15 June.

In Shanghai, the most active rubber contract for September delivery contracted by 6.2% during the period, while Japan's Osaka and Singapore's Sicom futures reported 3.5% and 3.8% declines respectively.

In Kuala Lumpur, latex 60% prices fell 12.2% during the period, while SMR20 prices declined 4.4%.

Bangkok also reported 5.2% and 6.3% declines in prices for STR20 and RSS3 rubber commodities during the two-week period.