Natural Rubber Weekly Report: Prices Weaken

1. Rubber Spot Market Analysis

This week, natural rubber prices generally maintained a narrow downward trend. On the supply side, Thailand entered its seasonal production increase cycle, but continuous showers in the south disrupted tapping. Although raw material prices declined, they remained high. Furthermore, the El Niño phenomenon continued to intensify, raising concerns about future supply. Downstream tire manufacturers experienced slow domestic sales, resulting in weak purchasing sentiment and a wait-and-see attitude.

This week, natural latex spot market prices remained relatively firm. As weather gradually improved in Southeast Asian producing areas, raw material and cost prices began to decline, and expectations of increased supply continued to rise. Overseas upstream processing plants faced sales pressure, putting downward pressure on natural latex prices. However, the domestic spot market is currently dominated by domestically produced concentrated latex, limiting actual supply pressure at ports. Meanwhile, downstream restocking demand improved compared to the previous period, providing support for 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

This week, southern Thailand experienced intermittent rainfall, resulting in lower latex production. Overseas latex demand remained at a basic level, reducing latex demand. Combined with expectations of increasing supply in production areas month by month, this pressure dragged down latex prices. Rainfall decreased in the northeast, and at the beginning of the week, processing plants maintained a strong rush to purchase raw materials, keeping cup lump prices high. Towards the end of the week, some large manufacturers lowered their prices to sell, thus reducing cup lump purchase prices.

2.2 Vietnam Production Area

This week, rainfall disturbances in Vietnam's production areas lessened, with fewer nighttime rains. Latex production steadily rebounded, remaining within the seasonal production increase cycle. However, influenced by the weakening domestic futures market, processing plants were more inclined to lower their purchase prices, leading to a decline in latex purchase prices from previous highs.

2.3 Yunnan Production Area

This week, weather disturbances in Yunnan's production areas were relatively limited, with overall raw material production maintaining a steady upward trend. Processing plants' willingness to lower purchase prices intensified, coupled with a significant decline in both futures and spot prices towards the end of the week, dragging raw material prices into a downward trend.

2.4 Hainan Production Area

This week, high temperatures persisted in Hainan's production areas. Combined with factors such as latex blooming, tapping operations were hampered, slowing the seasonal increase in raw material supply. However, both futures and spot prices declined, putting pressure on local processing plants' profit margins and reducing their willingness to pay higher prices for raw materials, resulting in a price drop.

3. Analysis of Natural Rubber Cost and Profit Situation

3.1. Overseas Production Areas: Thailand

The theoretical production profit loss of STR20 in Thailand widened compared to the previous period. Cup lump purchase prices remained high during the period, and factories faced continued pressure on raw material costs. Lower-priced transactions occurred in the Chinese market at the end of the week, further widening the theoretical production profit loss of STR20 compared to the previous period.

3.2. Domestic Production Areas: Hainan

Currently, the seasonal increase in raw material supply in Hainan has slowed, providing some support for raw material prices. However, towards the end of the week, with the simultaneous decline in both futures and spot prices, the profit margins of local processing plants began to be pressured.

4. Analysis of Natural Rubber Demand

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 61%.

This week, the tire operating rate declined compared to the previous week. Production at some semi-steel tire companies that underwent maintenance during the Dragon Boat Festival is gradually resuming, while a few companies are still under maintenance. The overall capacity utilization rate of the industry has seen limited improvement. Currently, domestic market sales are slow, while some overseas regions still provide some support, and domestic sales pressure remains.

4.2 Downstream of Concentrated Rubber Latex

It is understood that glove factories in North China are operating at approximately 50-60% capacity. The impact of previous policy disruptions has subsided, and e-commerce orders are gradually recovering, leading to a slight increase in factory operating rates. However, current raw material prices remain high, keeping production costs under pressure.

Currently, factory inventories of both raw materials and finished products are low. This week, with the decline in natural latex prices, factories have increased their restocking efforts, resulting in some replenishment of raw material inventories.

It is understood 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 rubber production is performing better than mold orders. Affected by the continued high prices of upstream raw materials, the current cost inversion in the processing stage has limited improvement in losses.

Currently, processing plants generally have low raw material and finished product inventory levels, with usable raw material inventory roughly equivalent to half a month's usage. During the week, some factories successively purchased domestic concentrated rubber to replenish their inventories based on actual production needs.

5. Natural Rubber Price Spread Chart

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