Kuala Lumpur – A downtrend in natural rubber prices has been reversed in recent days, helped by a worldwide reduction in Covid cases, progress in the US-China ties and the softening of US dollar.
The first half of September saw wide swings as both physical and futures markets started the month with muted sentiment.
A combination of increasing global Covid cases, retail sales slowdown in China, UK’s trade deficit and the automotive decline sent markets down between 6-9 Sept, said the Association of Natural Rubber Producing Countries (ANRPC) in its latest market analysis.
The downtrend, however, did not persist beyond 9 Sept, said the ANRPC report 20 Sept.
“The period starting from 10 Sept through mid-September has seen the prices strongly recovering both in the physical and futures markets,” it said.
The recovery, said ANRPC, was due to a number of factors including media reports on 9 and 10 Sept, giving evidence of a reduction in global Covid cases.
Furthermore, a softening of US dollar around 9 Sept, and the news of a 90-minute exchange between the US and Chinese presidents led to gains across global equities.
Also contributing to the strengthening prices were a revised EU economic outlook which anticipates a 5% economic growth within the Eurozone.
In addition, a return from summer holidays and an increase in traffic and public transport usage in the West, had positive effects on market sentiment.
To sum up, ANRPC said, first two weeks of September unfolded the 'dominant influence of external factors' on the NR prices.
“The pace of global economic recovery, developments in the auto sector, and crude oil trends are important factors from this perspective,” it added.
As for the short-term outlook, ANRPC said global markets are expected to be set by several key factors including potential demand from Chinese companies which will aim to build up inventories ahead of the off-season of supply.
In addition, perceptions of speculative investors on the timing of tapering (gradual reduction in massive stimulus) by the US Federal Reserve; strength of the dollar; developments in the crude oil market; and potential changes in the spread of Covid 19 will impact the markets.
While the month of October is expected to a see a rise in supply, the anticipated large volumes of imports from China could “wipe out” the increase in production, the report concluded.