Rubber Weekly: Limited Positives
1. Rubber Spot Market Analysis
This week, natural rubber prices showed a slight upward trend. Weather conditions in major producing areas improved this period, leading to a seasonal increase in upstream supply. Raw material procurement prices have room for further decline, weakening cost support for rubber. Downstream inquiries improved slightly, but buyers remained cautious with immediate needs, resulting in generally weak actual transactions. In the short term, the natural rubber market lacks substantial positive drivers, and rubber prices are likely to continue to fluctuate within a range.
This week, the natural latex spot market showed a clear volatile trend. Improved weather in producing areas led to a gradual increase in new rubber production, causing raw material and cost prices to ease and decline. However, downstream demand remained weak, with a lack of willingness to purchase raw materials for actual transactions. The expectation of a weakening supply-demand balance exerted downward pressure on rubber prices. Furthermore, the current macroeconomic factors have a strong correlation with commodity markets, increasing market volatility. Spot prices mostly maintained a narrow range of fluctuation without significant fluctuations.
Market Outlook:
1. Improved rainfall in domestic production areas, leading to increased supply expectations;
2. Expected improved operating rates for tire sample companies in the next cycle;
3. Continued destocking trend in Qingdao, China;
4. Macroeconomic environment disturbances.
2. Natural Rubber Supply Analysis
2.1 Thailand Production Area
This week, reduced rainfall in Thailand's production areas facilitated smooth tapping, gradually releasing raw material output and putting downward pressure on latex prices. Secondary traders actively sold off their stock previously, resulting in low inventory levels. Dry rubber processing plants and secondary traders replenished their stocks to meet immediate needs, keeping cup lump prices generally high.
2.2 Vietnam Production Area
This week, Vietnam's production areas were in their seasonal increase cycle, with overall supply progressing smoothly. However, frequent short-term rainfall in the main production areas disrupted tapping operations, limiting the actual release of raw materials.
2.3 Yunnan Production Area
This week, phenological conditions in the Yunnan production area improved significantly compared to last week, allowing rubber tapping to proceed normally. Overall, rubber collection was good, and the increased supply of raw materials led to a slight easing in purchase prices.
2.4 Hainan Production Area
This week, weather conditions in the Hainan production area gradually improved, and rubber tapping resumed. Raw material output on the island showed a week-on-week increase. As the pace of new rubber supply gradually returned to normal, the pressure on local processing plants to replenish raw materials was alleviated. Coupled with the squeeze on processing profits from previously high raw material prices, the market's rush to buy raw materials cooled significantly, driving down the center of gravity of raw material purchase prices.
3. Analysis of Natural Rubber Cost and Profit Situation
3.1 Overseas Production Area: Thailand
The theoretical production profit of Thai STR20 rubber improved slightly compared to last week. Cup lump purchase prices remained relatively stable during the period. The depreciation of the Thai baht alleviated the raw material cost pressure on processing plants, and the profit margin of Thai standard processing plants narrowed compared to the previous period.
3.2 Domestic Production Areas: Hainan
This week, the theoretical production profit of domestically produced state-owned concentrated latex rubber in Hainan showed a slight upward trend. Weather conditions gradually improved, rubber tapping operations resumed, and raw material output on the island showed a month-on-month increase, driving down the center of gravity of raw material purchase prices. Meanwhile, spot prices remained relatively firm, leading to an improvement in the theoretical production profit of concentrated latex rubber.
4. Natural Rubber Demand Analysis
4.1 Downstream of Dry Rubber
The operating rate of semi-steel tires in China is 63%. The operating rate of all-steel tires in China is 65%.
This week, tire repair companies gradually resumed production, driving an upward recovery in the overall operating rate. Currently, many companies have weak order performance and slow shipments. Temporary maintenance and production control measures still exist, limiting the overall increase in operating rates.
4.2 Downstream of Concentrated Rubber
Glove factories in North China are operating at approximately 30-40% capacity, with some factories already shut down and others reporting plans to reduce or halt operations. The main reasons are twofold: firstly, high temperatures are limiting production efficiency in workshops; secondly, the traditional off-season for demand is leading to a contraction in new orders from end-users, thus dragging down manufacturers' willingness to operate. Simultaneously, the continued decline in upstream raw material prices has intensified factories' wait-and-see attitude towards procurement, with only small-scale replenishment for immediate needs.
It is understood that foam factories in Wenzhou are operating at approximately 50% capacity. Finished product orders have improved compared to the previous period. Coupled with the continued decline in raw material prices and the gradual recovery of processing profits, their operating rates have slightly rebounded, and raw material inventory turnover has accelerated.
Recently, some processing plants have purchased raw materials, but only in small quantities for immediate needs at low prices. Surveys show that some large factories have enough raw material inventory to support about half a month of production, while smaller factories maintain low inventory levels, mainly purchasing raw materials as needed.
5. Natural Rubber Price Spread Chart
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