Chip shortage, China tech crackdown to impact NR futures

Kuala Lumpur – Natural rubber (NR) futures market, particularly the Shanghai Futures Exchange, is likely to be impacted in the short-term by concerns over China’s tightening regulatory grip on technology firms, according to the Association of Natural Rubber Producing Countries (ANRPC).

China’s stock market has been in turmoil with heavy sell-off, exodus of funds and devaluation of yuan as a result of the Chinese government's regulatory crackdown on the tech sector, said ANRPC in its latest bi-weekly market intelligence report. 

While a 29 July intervention by the Chinese central bank has eased concerns among speculative investors, the current less active speculative sentiment in the futures market could weight on NR prices in short term, the 2 Aug reported noted.

Another concern, said the report, is the continuing global logistic disruptions and acute shortage of semi-conductor chips, which are pulling back the recovery momentum in several key sectors. 

The automotive manufacturing industry, a dominant end-use segment of NR, is hit by the chip shortage worldwide, with some global auto majors having slashed their output. 

Such concerns, according to ANRPC, can pull back speculative investors from risky bets, affecting rubber futures. 

Conditions in the physical market, however, can stay favourable as demand is set to rise, particularly from China, India, US and Europe.

The four regions represent 65% of global demand for NR and can “more than offset” a relatively lower offtake by Thailand, Indonesia, Malaysia and Vietnam, which are currently under Covid lockdowns.

Furthermore, the dollar is set to lose its attraction as a ‘safe-haven asset’, as governments and economies resume activities and lift Covid restrictions across the globe.

This, ANRPC said, could positively impact NR markets.