Kuala Lumpur - A recovery trend for natural rubber (NR) prices observed in late May and early June in the Far East markets has been broken, due in part to fears of a second wave of Covid-19 pandemic, according to the Association of Natural Rubber Producing Countries (ANRPC).
The daily settlement prices of the rubber contracts for September 2020 at the Shanghai Futures Exchange increased by 3.5% between 26 May and 8 June followed by a decline which continued through 30 June, said ANRPC’s monthly NR statistics update 3 July.
Similarly, Sicom and TOCOM exchanges moved along a recovery path during the period, followed by a downtrend which continued till the end of June.
The ANRPC linked the uptrend to the positive sentiment generated by the relaxation of containment measures and lockdowns, resumption of economic activities across countries, and improved hopes on the recovery in crude oil prices.
Asian commodities also presumably gained from the tension in the US following the riots in the major US cities over the death of an African-American man on 25 May.
“The anarchy in the US triggered a flow of funds from the US to the Asian markets,” the ANRPC noted.
However, the positive sentiment in the NR market did not sustain beyond mid-June, due in part to a rise in the number of Covid-19 infections in China and the US which sparked fears of a second wave of the pandemic.
Among the three rubber futures analysed above, Tocom futures suffered more losses due to the additional negative influence of the Japanese yen during the period.
Trends in physical markets tracked a similar path, with reference prices of SMR20 at Kuala Lumpur FOB market fell 3.7% between 9-30 June, having registered a 5.7% growth for the two weeks prior to that.
In the third quarter of the year, ANRPC expects market sentiment to be triggered by a set of other favourable economic developments.
These include the “impressive performance” of China’s manufacturing in June and the U-turn in the country’s car sales, which rose 14.5% in May after a 43% fall in March.
Trends in crude oil market are also expected to stay favourable to NR, the association added.
However, the association said, concerns over the second wave of Covid-19, delay in implementing economic stimulus policies by governments and increasing geopolitical conflicts still posed risks to the favourable market conditions.