Natural Rubber Weekly Report: Prices Decline

1. Rubber Spot Market Analysis

This week, natural rubber prices showed a slight upward trend. Weather disruptions in major producing areas during this period prevented a full recovery in tapping, keeping raw material procurement prices high and maintaining relatively strong cost support. Coupled with the limited actual delivery volume of TSR20 rubber, the near-term strength and far-term weakness structure became more prominent again, and market bullish sentiment remained. However, the seasonal weakness of downstream tire manufacturers in China is unlikely to change, slightly weakening the upward drive for rubber prices, which are expected to remain range-bound in the short term.

This week, the natural latex spot market showed range-bound consolidation. Abnormal weather in major producing areas both domestically and internationally prevented a return to normal tapping, keeping latex procurement prices high. Furthermore, the supply in consuming areas is still mainly domestic concentrated latex, resulting in relatively low spot market supply pressure and supporting natural latex prices. However, weak demand from downstream product manufacturers limited their enthusiasm for raw material procurement. Meanwhile, the domestic import window is gradually opening, increasing the possibility of imported concentrated latex entering the domestic market, which will continue to put upward pressure on rubber prices.

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

Strong storms in parts of Thailand disrupted the overall rubber tapping schedule. Factories and secondary dealers stockpiled, resulting in a temporary tight supply of raw materials and a renewed rise in raw material prices. Factory raw material inventories ranged from about one month to three months, with some factories gradually increasing their reserves slightly. Finished product inventories remained generally low.

2.2 Vietnam Production Area

This week, Vietnam was in its seasonal production increase cycle, with raw material supply returning to normal. However, frequent rainfall during the week affected tapping operations and raw material output. Vietnamese rubber processing plants, facing profit margins, were unwilling to purchase raw materials at high prices, focusing instead on lower purchase prices. This week, latex purchase prices continued to weaken slightly.

2.3 Yunnan Production Area

This week, raw material prices in the Yunnan production area showed a relatively strong but consolidating trend. The main reason was the persistent rainfall disrupting rubber tapping, making it difficult for local processing plants to procure raw materials, resulting in widespread intermittent operation.

2.4 Hainan Production Area

This week, the Hainan production area was still affected by typhoons and other weather factors. The persistent rainfall disrupted rubber tapping operations. Only during a brief period of slight improvement in the weather mid-week did overall raw material circulation remain insufficient, and the increase in new rubber supply remained low.

3. Analysis of Natural Rubber Cost and Profit Situation

3.1 Overseas Production Area: Thailand

Thailand's theoretical production profit for STR20 rubber was negative compared to last week. Cup lump purchase prices stopped falling and rose during the week, further highlighting the raw material cost pressure on processing plants. While finished product offers increased, domestic and international market buyers pressured for lower prices, resulting in raw material purchase price increases exceeding those of finished products. This further widened the loss margin for Thai standard processing plants.

3.2 Domestic Production Area: Hainan

This week, the Hainan production area was still affected by weather factors such as typhoons, resulting in insufficient overall raw material circulation. New rubber production remained low, and downstream demand was generally weak. Local processing plants were cautious about replenishing their raw material inventories, and the premium for purchases remained stable. Spot prices increased slightly, leading to a slight improvement in concentrated rubber profits to some extent.

4. Natural Rubber Demand Analysis

4.1 Dry Rubber Downstream

China's semi-steel tire operating rate was 61%. China's all-steel tire operating rate was 61%.

This week, tire operating rates declined compared to the previous week. Tire companies showed varying supply performance. Leading companies maintained relatively good operating rates, but some were experiencing production cuts due to reduced orders. Most companies in Shandong were controlling production. Since early July, companies have been rotating maintenance based on their own circumstances, dragging down the overall supply. Recently, export shipments have been relatively good, but domestic sales are under pressure.

4.2 Downstream of Concentrated Rubber

Glove factories in North China are operating at approximately 30-40% capacity, with some already shut down and others reporting plans to reduce or halt production. The main reasons are twofold: firstly, high temperatures are limiting production efficiency in workshops; secondly, the off-season for demand is causing a contraction in new orders, thus lowering manufacturers' willingness to operate. Simultaneously, the continued decline in upstream raw material prices has intensified factories' wait-and-see attitude towards procurement, maintaining only small-scale replenishment for immediate needs.

It is understood that foam factories in Wenzhou are operating at approximately 40% capacity, mostly maintaining production schedules for existing customers, with a cautious approach to production line adjustments. Sheet metal production is performing better than mold orders. The previous continuous decline in raw material prices effectively restored the profitability of factories' processing segments, and most factories have completed a round of phased raw material replenishment. Currently, the overall willingness to purchase raw materials is weak, with a significant reduction in new purchases. According to surveys, some large factories have approximately half a month's worth of raw material inventory available, while smaller factories maintain low inventory levels, primarily purchasing raw materials as needed.

5. Natural Rubber Price Spread Chart

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