Kuala Lumpur – Natural Rubber (NR) prices, particularly on physical markets, are set to make significant gains in the second half of August and in September, according to the Association of Natural Rubber Producing Countries (ANRPC).
In an 18 Aug market intelligence report, ANRPC said Chinese rubber goods manufacturers in China are now "compelled" to import large volumes of the commodity as total inventory kept in local warehouses has 'substantially declined.'
This, it said, is because Chinese manufacturing companies currently prefer sourcing NR from domestic warehouses rather than importing the commodity amid rising freight container prices.
Furthermore, China has entered a five-month peak production season (from July to November), during which it is expected to consume around 500 kilotonnes of NR per month.
Of this amount, ANRPC said, about 115 kilotonnes per month can be met from the domestic production, leaving the country with a monthly deficit of 385 kilotonnes per month, even during the peak season of NR production.
“At this rate, the total deficit during the four months from August to November is estimated at 1.54 million tonnes,” said the intelligence report.
To add to that, NR production levels in China are expected to remain “extremely low” during the period between December 2021 to April 2022, due to annual wintering season.
“Assuming the average monthly consumption of 500,000 tonnes and considering the extremely low domestic production from Dec 2021 to Apr 2022, China may have to import about 2.40 million tonnes of NR to bridge the deficit,” the report added.
The imminent entry of Chinese buyers into the Asian NR market for large-scale imports, said ANRPC, is expected to dominate sentiment in the physical markets “at least for the next couple of months.”
Higher demand from the US, EU, UK and India is also expected to support the higher prices over the coming months, ANRPC added.
“This is one of the rare phases in which rubber futures are driven by physical prices rather than the usual other way round,” the intelligence report concluded.