High and Lonely: Natural Rubber Needs Caution（Sep 11）

High and Lonely: Natural Rubber Needs Caution

Market Review: Concentrated Positive Factors Drive Rally

Recently, a convergence of fundamental bullish factors, supported by a favorable macro environment, has collectively driven natural rubber market sentiment higher, with prices rising sharply. On the cost side, raw material prices in both domestic and international producing regions continued their upward trend. On the inventory side, spot inventories maintained their destocking trend, with downstream restocking on rigid demand providing continued support. On the news front, market rumors circulated that the duty-free policy for domestic sales of substitution rubber in Yunnan had expired, lifting spot costs for substitution rubber. At the macro level, crude oil markets strengthened significantly during the period, driving an overall warmer sentiment across commodities.

Market Review: Weather Disruptions Remain Strong

Raw material prices in domestic and international producing regions continued to rise. Upstream processing plants actively purchased at higher prices, intensifying competition for raw material procurement, and the cost support for natural rubber continued to strengthen.

In Thailand, rainfall increased during the period, particularly in the northeastern regions where excessive rainfall slowed raw material release. Dry rubber plants showed strong willingness to purchase at higher prices, continuously bidding up raw material prices. In domestic producing areas, Hainan experienced localized rainfall disruptions. Combined with the broad rally in futures during the period, arbitrage positions increased their willingness to add positions, driving an increase in orders for local concentrated latex processing plants and an upward recovery in profit margins. Given the continued expectation of persistent rainfall disruptions in producing areas, local processing plants maintained strong production enthusiasm, with intensified bidding for raw materials, continuously pushing purchase price centers higher.

Demand Side: Production Control and Cost Pressure Limit Tire Operating Rate Gains

During the period, the tire industry operating rate showed structural divergence, with semi-steel and all-steel tires performing differently. On the semi-steel side, previously maintenance-suspended plants gradually resumed production, driving a recovery in operating rates. However, most enterprises still maintained production control measures, limiting the magnitude of operating rate recovery, resulting in limited overall recovery. On the all-steel side, although a few maintenance-suspended plants resumed operations, recent continuous rises in raw material prices pushed some规格 products into losses, intensifying enterprises' willingness to control production, dragging overall operating rates lower rather than higher.

Overall, cost pressure and production control mentality jointly dominate the current tire production rhythm. The industry's overall operating rate remains sluggish, and procurement demand for upstream raw materials is unlikely to see significant volume increases.

Outlook: Supply Support and Declining Warehouse Receipts, but Demand Negative Feedback Emerging

The natural rubber market is currently in a game phase of "strong bullish support persists, but negative feedback risks are accumulating." On the support side, short-term rainfall disruptions in main producing regions remain uncertain, limiting raw material release. Processing plants continue restocking on rigid demand, raw material prices maintain high levels, and cost-side support for rubber prices remains solid. Additionally, market rumors of the expiration of the Yunnan substitution rubber domestic sales duty-free policy, combined with continued cancellations of TSR20 warehouse receipts and low new registration volumes, have tightened circulating spot resources, providing strong support for spot prices.

However, the risk side cannot be ignored. Downstream acceptance of high-priced raw materials remains weak, with sluggish procurement follow-through. Some enterprises have already planned production suspensions or reductions, and the negative feedback effect along the industry chain is gradually manifesting, which will suppress further upside in rubber prices.

Overall, the natural rubber market still has expectations for continued near-term upside, but the long-short game is intensifying. Caution is needed regarding the risk of a pullback from highs, with key focus on the implementation of downstream production suspensions/reductions and changes on the raw material side.

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