Natural Rubber Weekly Report: Prices Weakening

1. Rubber Spot Market Analysis

This week, natural rubber prices saw a slight increase, but the magnitude was limited. Increased rainfall in domestic and international producing areas this period temporarily hampered the release of new rubber, limiting further declines in raw material prices and increasing cost support.

Following the previous price drop, tire manufacturers replenished their stocks faster than expected, potentially leading to concentrated deliveries this week, which may alleviate inventory pressure at Qingdao Port. However, weak end-user demand and continued production controls by some downstream companies meant the natural rubber market lacked upward momentum and is likely to remain range-bound in the short term.

This week, natural latex spot market prices remained relatively firm. Increased rainfall both domestically and internationally, especially with typhoon expectations in Hainan producing areas, slowed the pace of new rubber production and hindered the downward trend in raw material prices.

Meanwhile, the spot market in consuming areas still primarily consisted of domestically produced concentrated latex, limiting actual supply pressure. Supply and costs provided relatively strong support. However, post-rainfall raw material supplies in producing areas are expected to increase seasonally, and downstream demand is generally weak due to the off-season, maintaining the expectation of increased supply and weak demand, which exerts strong downward 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

Raw material supply in Thailand is entering a seasonal month-on-month increase phase, with processing plants continuously lowering raw material purchase prices, resulting in a wide decline in raw material prices. However, this week, heavy rainfall in Thailand disrupted the rubber tapping schedule, temporarily limiting the pace of rubber tapping. Raw material prices stabilized after a week of decline.

2.2 Vietnam Production Area

This week, rainfall increased in Vietnam's production areas, resulting in a relatively stable raw material supply. Overall, it is in a seasonal production increase cycle. Affected by the increased raw material supply and a weakening futures market, processing plants in the production area are cautious in their purchasing, continuing their willingness to lower prices for rubber. Demand for cup lump rubber is relatively stable, and prices are resilient. Factory production remains focused on concentrated latex production lines, while the operating rate of dry rubber production lines has slightly recovered, but remains at a low level overall.

2.3 Yunnan Production Area

At the beginning of the week, rainfall in the Yunnan production area hampered new rubber production, leading to a relatively strong but stable mainstream raw material purchase price. Towards the end of the week, the rainfall improved, and new rubber production gradually resumed. Mainstream raw material purchase prices remained relatively stable, with lower-end prices slightly increasing.

2.4 Hainan Production Area

This week, rainfall continued to disrupt rubber tapping operations in the Hainan production area, resulting in limited available raw material supply. Overall, the spot market saw relatively weak purchasing sentiment, with local processing plants making limited purchases and resulting in limited fluctuations in raw material purchase prices.

3. Analysis of Natural Rubber Cost and Profit Situation

3.1 Overseas Production Areas:Thailand

The theoretical production profit of STR20 in Thailand improved compared to last week. Cup lump purchase prices fell sharply during the week, easing raw material cost pressures on processing plants. They actively shipped to China, with many transactions at low prices, but the decline in finished product prices was less than the decline in raw material prices, leading to a significant recovery in the theoretical processing profit of STR20 compared to last week.

3.2 Domestic Production Area: Hainan

This week, Hainan's production area was affected by factors such as a tropical depression, resulting in continued rainfall and a temporary tightening of new rubber production. Due to a slightly tight overseas supply, domestic rubber demand improved, leading to an improvement in spot prices. However, the increase in raw material prices was limited, resulting in a slight improvement in profits.

4. Natural Rubber Demand Analysis

4.1 Downstream Dry Rubber

China's semi-steel tire operating rate is 65%. China's all-steel tire operating rate is 64%.

This week, tire operating rates improved slightly compared to the previous week. Companies that underwent long maintenance at the beginning of the week have resumed operations as planned, and production is gradually recovering. However, considering the current raw material and order situation, most companies are maintaining their previous production control measures. However, the end of this week coincides with the beginning of July, and a small number of companies in Dongying and Weifang have maintenance schedules, including semi-steel and all-steel tire companies, mostly for 3-5 days, with some longer maintenance periods, which to some extent delays tire product supply at the beginning of the month.

4.2 Downstream of Concentrated Rubber

It is reported that glove factories in North China have seen their operating rates decline to 30-40%, with some factories already shut down and others reporting plans to reduce or halt production. The main reasons are twofold: firstly, high temperatures have limited production efficiency in workshops; secondly, the off-season for demand has led 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, maintaining only small-scale restocking for immediate needs.

It is reported that foam factories in Wenzhou are operating at approximately 40% capacity, mostly maintaining production schedules for existing customers. They are cautious about adjusting production lines. Sheet metal production is performing better than mold orders. With the recent gradual decline in raw material prices, the current cost inversion and losses in the processing stage have improved, leading to a recovery in the willingness of some processing plants to restock raw materials. Some large factories have approximately half a month's worth of raw material inventory available, while smaller factories maintain low inventory levels, mainly purchasing raw materials as needed.

5. Natural Rubber Price Spread Chart

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