Natural Rubber Weekly Report: Weak Performance

1. Rubber Spot Market Analysis

This week, natural rubber prices saw a narrow decline. At the beginning of the week, intermittent rainfall in major producing areas both domestically and internationally disrupted tapping schedules, halting the decline in raw material procurement prices. High costs provided strong support for rubber prices. 

As weather conditions improved, raw material supply gradually increased, leaving room for further price reductions. Overseas factories showed strong sales performance, gradually weakening cost support. With a weakening external macroeconomic environment, short-term support for natural rubber raw material prices was weak, and demand dragged down significantly, resulting in a weak and volatile price trend.

This week, the natural latex spot market saw a slight decline. Rainfall is expected in producing areas both domestically and internationally, disrupting the new rubber production schedule and limiting the downside potential for raw material prices. Meanwhile, insufficient imports of concentrated latex from overseas replenished the market, resulting in low supply pressure in consuming areas.

Traders' holding costs were high, reducing their willingness to offer discounts. However, downstream product manufacturers showed weak demand and a wait-and-see attitude towards raw materials. Furthermore, recent macroeconomic factors intensified, leading to a weak and volatile futures market, further suppressing purchasing sentiment and slowing market trading, thus dragging down rubber prices.

Market Outlook:

1. Improved rainfall in domestic production areas, leading to increased supply expectations;

2. Expected decline in operating rates of tire sample companies 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, overall rainfall in Thailand increased compared to the previous week, but market trading was somewhat sluggish due to the holiday. Processing plants showed little willingness to purchase raw materials, only replenishing their inventories for immediate needs. Coupled with continued market expectations of increased supply, raw material purchase prices continued to decline.

2.2 Vietnam Production Area

This week, Vietnam's production area was in its seasonal increase cycle, with overall supply progressing steadily. However, frequent short-term rainfall in the main production areas intermittently hindered rubber tapping operations, limiting the actual release of raw materials.

2.3 Yunnan Production Area

This week, Yunnan's production area continued to be affected by rainfall, resulting in overall raw material output falling short of expectations. The actual amount of raw materials that local processing plants could purchase was relatively limited. However, dragged down by weak futures and spot prices, raw material purchase prices adjusted downwards.

2.4 Hainan Production Area

This week, weather conditions in the Hainan production area gradually improved, and rubber tapping operations resumed. Raw material output on the island showed a week-on-week increase. As the pace of new rubber supply gradually returned to normal, however, towards the end of the week, some areas experienced rain, restricting rubber tapping operations and causing a week-on-week decline in fresh latex production. Affected by weak futures and spot market conditions, local processing plants slightly reduced their premiums for raw material purchases.

3. Analysis of Natural Rubber Cost and Profit Situation

3.1 Overseas Production Area: Thailand

The theoretical production profit of Thai STR20 rubber widened compared to the previous week. Cup lump purchase prices continued to decline during the period, the Thai baht appreciated, and processing plants continued to face raw material cost pressures. Futures prices fluctuated and fell, market sentiment was bearish, dragging down factory offers significantly. The profit loss margin for Thai standard rubber processing plants widened compared to the previous period.

3.2 Domestic Production Area: Hainan

This week, the theoretical production profit of domestically produced concentrated rubber latex in Hainan remained relatively firm. Rainfall gradually increased in the Hainan production area, hindering rubber tapping operations. However, actual purchases by processing plants were limited, and raw material prices slightly declined. Coupled with the weak futures and spot market during the week, the production profit of concentrated rubber enterprises remained relatively firm.

4. Natural Rubber Demand Analysis

4.1 Downstream Dry Rubber

The operating rate of semi-steel tires in China was 64%. The operating rate of all-steel tires in China was 64%.

The operating performance of sample enterprises varied during the period. Semi-steel tire enterprises resumed operations after maintenance, leading to a recovery in the operating rate. However, some small-scale enterprises were still undergoing maintenance at the end of the month, limiting the overall increase in operating rate. Some sample all-steel tire enterprises planned maintenance at the end of the month, dragging down the operating rate.

4.2 Downstream of Concentrated Emulsion

It is understood that glove factories in North China are operating at approximately 40% capacity, with some factories already shut down, and some reporting plans to reduce or halt operations. High summer temperatures have reduced production efficiency in workshops, and the traditional off-season has led to a contraction in new orders from end-users, further dampening manufacturers' willingness to operate. Given current raw material prices, factories are largely adopting a wait-and-see approach due to order cost pressures, only maintaining small-scale restocking for immediate needs.

It is understood that foam factories in Wenzhou are operating at approximately 50% capacity. After a period of capacity adjustment in the domestic foam products industry, excess capacity has been largely cleared. Some processing plants are adding new production lines for rubber filaments to optimize their product structure. Recently, orders for finished foam products have shown a marginal recovery, but market competition in the sheet material sector remains relatively fierce.

Simultaneously, with raw material prices falling significantly compared to the previous period, factory processing profits have improved, and overall operating rates have slightly increased, with raw material inventory turnover accelerating accordingly. Processing plants have recently begun purchasing raw materials, but restocking is cautious, mainly focusing on small-scale restocking at low prices.

5. Natural Rubber Price Spread Chart

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