Natural Rubber Market Review (December 19)

Market Review: In the first half of the month, natural rubber prices rebounded after a decline. At the beginning of the month, the floods in Thailand gradually subsided, and rubber tapping and factory production resumed. The expected increase in supply put downward pressure on raw material prices, leading to a decline in overseas raw material prices. In Yunnan, rubber tapping has largely ceased, and latex production lines have gradually shut down, resulting in a firm raw material market. Downstream, it was the seasonal off-season, and weak end-user demand coupled with ample supply led to an increase in finished product inventories.

Natural rubber spot inventories continued to accumulate significantly, dragging rubber prices into a downward trend. Towards mid-month, external factors boosted prices, and rubber prices began a narrow rebound. From a fundamental perspective, the impact of reduced production due to the cessation of tapping in domestic production areas has largely dissipated.

Overseas production areas are gradually entering their peak production season after weather improvements, and the seasonal inventory buildup pressure remains. The expectation of increased supply dominated the spot market, causing rubber prices to decline slightly. However, as the geopolitical tensions between Thailand and Cambodia escalated, affecting localized rubber tapping and factory production, market sentiment improved, and rubber prices began to rebound towards mid-month.

Cost Side: Peripheral Issues Strengthen Cost Support

Thailand Production Area: At the beginning of the month, northeastern Thailand maintained peak production, and cup lump prices continued to decline. Floods in southern Thailand gradually subsided, and tapping and factory production resumed. Although there was some scramble for raw materials, the expected increase in supply put pressure on raw material prices, causing latex prices to fall. Towards mid-month, escalating geopolitical tensions between Thailand and Cambodia affected localized tapping and factory production. Rainfall in the south increased slightly compared to the previous month, resulting in an overall trend of initial decline followed by a rise in raw material prices.

Vietnam Production Area: At the beginning of the month, weather in Vietnam's production areas varied regionally. Rainfall in the south briefly affected tapping operations, while the impact of extreme weather in the central and northern regions weakened. Due to reduced rubber imports, factory procurement costs increased, and with raw material prices inverted, factories slowed their import pace. The tight supply of raw materials supported price increases.

Towards mid-month, weather gradually returned to normal. Weather improved in the main production areas, and no extreme weather disrupted tapping operations. Imported rubber still had no profit margin, and to ensure order fulfillment, local factories actively procured raw materials, keeping 3L rubber prices firm.

Yunnan Production Area: Raw material prices in Yunnan production area remained stable, and the region entered its off-season for rubber tapping. Due to the off-season, rubber farmers are more willing to sell their raw materials, resulting in more stock compared to last year. This has also stimulated some processing plants to replenish their mixed rubber stocks. Currently, factory production is mainly focused on mixed rubber lines, while whole latex and concentrated latex lines are largely shut down.

Hainan Production Area: In the first half of the month, Hainan production area experienced relatively more rainfall, increasing disruption to rubber tapping operations. Simultaneously, temperatures dropped, causing the dry content of fresh latex to decline to around 26-27%. Overall raw material output showed a seasonal decrease. However, dragged down by falling futures and imported concentrated latex prices, local processing plants were less willing to purchase raw materials at high prices, leading to a reduction in raw material purchase prices.

Downstream Demand: Weak Actual Demand and Increased Inventory Pressure

In the semi-steel tire market, trading was weak at the beginning of the month and during the month-end transition. The all-season tire market remained weak and stable. At the end of November, distributors had replenishment needs based on sales targets, resulting in average channel sales. The snow tire market had ample supply, but demand needs further improvement. Market transactions were sluggish towards mid-month, with prices trending weakly. It is understood that some companies offered price reductions to increase market purchases during the month, but demand remained weak, limiting the effect. Distributors focused on clearing existing inventory, delaying restocking cycles.

In the all-steel tire market, transactions were sluggish at the beginning of the month. Affected by the seasonal off-season, market demand weakened further. With relatively ample supply, the focus was on clearing existing inventory, resulting in generally low purchasing activity. Market transaction prices remained stable with a slight downward trend. To increase sales and recover funds, some merchants engaged in promotional activities based on their own inventory levels.

Market performance was quiet towards mid-month, with the off-season demand becoming more pronounced, and market transactions weakening further. Overall, the southern region performed better than the northern region, with sales in many southern areas declining by about 15%. Some areas in the northwest and northeast may experience a precipitous drop. Distributors had relatively ample inventory and low purchasing activity. However, considering the annual purchase target, they still made purchases, further increasing inventory reserves.

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