Affected by rain (typhoon) disturbances in major production areas – which have led to insufficient supply of new rubber – coupled with high raw material costs and support from downstream low-price replenishment, the price of natural rubber has shown a short-term strong fluctuation within a range. In the medium and long term, it is necessary to focus on the weather in production areas during the peak production season and the volume of new rubber supply. If abnormal climate conditions persist, support from the supply side may continue.
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1. Major International Production Areas: Rain (Typhoons) Disrupt Supply, Raw Material Prices Remain Firm.
At the start of this year’s rubber-tapping period, phenological conditions were normal. However, after full-scale tapping began, excessive rainfall hindered rubber-tapping activities, and the release of new rubber fell short of expectations. Recently, Typhoon "Swordfish" has caused heavy to torrential rain in major production areas such as northern Thailand and central-northern Vietnam, further slowing down the release of new rubber.
Strong cost-side support: As of August 28, the purchase prices of glue and cup rubber in Thailand reached 55.45 Thai baht per kilogram and 50.7 Thai baht per kilogram respectively, with raw material prices remaining persistently high.
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2. Major Domestic Production Areas: Excessive Rainfall, Output Below Expectations, and Rising Expectations of Production Cuts.
The initial rubber-tapping phase progressed smoothly, but rainfall increased after June. In July, Typhoon "Wipa" caused rainfall in the Mengla area to surge by 188% year-on-year, reducing the number of rubber-tapping days. Although rainfall in August improved compared with July, the release of supply was still disrupted.
Affected by typhoons from June to August, the release of output in Hainan’s production area fell short of expectations, and market expectations of production cuts within the year have risen. As of August 28, the daily output of glue across the entire island was only 3,000 to 4,000 tons, with tight raw material supply. It is predicted that there will still be relatively heavy rainfall next week.
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3. Processing Sector: Profit Release Boosts Production, Tight Raw Material Supply Drives Price Increases.
Currently, the raw material inventory reserves of Thai processing plants are at a neutral-to-low level. However, since the first ten days of June, rubber prices have strengthened, and the theoretical processing profit of standard rubber has been gradually released – which has boosted enterprises’ enthusiasm for production and raw material procurement.
Processing profits in the first eight months of this year were generally better than those in the same period last year. Combined with insufficient raw material output, raw material prices have been further pushed up.
4. Short-Term Supply Side: Persistent Disturbances in Typhoon-Prone Season, Sustained Support.
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September is a season with frequent typhoons. On August 28, the Hainan Meteorological Bureau issued a Level 4 Typhoon Warning: the tropical disturbance originally located in the eastern part of the South China Sea has intensified into a tropical depression at 14:00 on the 28th. This depression will move west-northwest at a speed of 15-20 kilometers per hour, with gradually increasing intensity, and may intensify into the 14th typhoon of this year on the 29th, approaching the sea area south of Hainan Island. It is expected to trigger heavy rainfall in major production areas again, so the release of new rubber will still be restricted.
The release of raw materials has fallen short of expectations, and factories have limited inventory reserves. The trend of high raw material prices will continue, and cost-side support provides strong short-term bottom support for rubber prices.
