Kuala Lumpur – Natural rubber prices were “strongly bullish”, both in the futures and physical markets, during the second half of February, helped largely by a supply deficit and increasing demand from China.
According to preliminary estimates by the Association of Natural Rubber Producing Countries (ANRPC), world NR fell 12.4%, year-on-year, to 897 kilotonnes in February, while demand recovered at a 47.5% rate to 1.103 million tonnes.
“The February-April period is the season of low supply of NR over as farmers generally give layoff to harvesting during this season coinciding with the annual wintering and refoliation of rubber trees,” said ANRPC in a 4 March market intelligence report.
In addition to the seasonal factor, ANRPC noted that that supply from major producing countries has been constrained by the new fungal leaf diseases that affected 387,000 hectares of mature rubber trees in Indonesia, 141,000 hectares in Thailand, 16,000 hectares in Malaysia, and to a limited extent in Sri Lanka and India.
Moreover, the report noted that harvesting still remains hindered in Thailand and Malaysia as skilled migrant workers are restricted from travelling to the countries.
Another fundamental factor driving the price uptrend was an increase in the offtake of NR in China during the month, despite the Chinese New Year holiday season.
Citing preliminarily estimates, ANRPC said that China consumed 431 kilotonnes of NR during Feb against “an abnormally low” baseline of 104,200 tonnes in 2020 and 378 kilotonnes in February 2019.
The ANRPC linked the higher consumption rate in China to domestic travel restrictions imposed in the country to curb the spread of Covid-19.
The restrictions, it said, led to workers remaining at their job stations during the holidays and delivering higher factory utilisation rates.