Rubber Special Issue - No. 20260312

1. Rubber Spot Market Analysis

This week, natural rubber prices generally trended upward. Domestic rubber tapping season is about to begin, and overseas raw material prices remain high, creating a complex and uncertain environment in upstream production areas.

Holders of rubber were generally not very active in offering prices, while downstream inquiries were weak, with buyers selectively replenishing their stocks at lower prices, resulting in sluggish actual transactions. However, escalating geopolitical risks overseas and persistent market uncertainties suggest that the natural rubber market may experience a volatile trend amidst this mixed environment.

This week, the spot market for natural latex saw prices consolidate with a slight upward bias. Traders were reasonably active in offering prices, while the futures market showed a slightly upward trend. Overseas processing plants raised their USD-denominated cargo prices, strengthening import cost support. However, weak downstream demand and sluggish market transactions made it difficult to raise latex prices. Spot prices remained stable to slightly stronger, with transactions awaiting further developments.

Market Outlook:

1. Global natural rubber supply is in a low-production period, maintaining relatively strong cost support.

2. The operating rate of sample tire manufacturers is expected to increase in the next cycle.

3. Inventory accumulation in Qingdao, China, is slowing down.

4. Exchange rates and the Fed's interest rate cuts, etc.

2. Natural Rubber Supply Analysis

2.1 Thailand Production Area

During the cycle, raw material procurement prices in Thailand continued to rise, with a significant price difference maintained. Tapping has ceased in northern and northeastern Thailand; tapping is gradually ceasing in southern Thailand, leading to a tight supply of raw materials. Factories have restocking needs, driving up procurement prices.

Factory raw material inventories are generally at 2-3 months' worth, showing a downward trend compared to the same period last year. Domestic arbitrage positions increased slightly during the cycle, while shipments from Thai factories were average, with shipping dates until August/September.

2.2 Vietnam Production Area

This week, tapping in Vietnam's main natural rubber producing areas has basically ceased, with very little fresh latex production. Only some state-owned farms are still tapping.

2.3 Yunnan Production Area

Following the Lantern Festival this week, processing plants in Yunnan's rubber-producing areas have gradually resumed operations. Good rubber tree production, coupled with rainfall in some areas resulting in moist ground, has strengthened expectations for an earlier tapping start this year. Surveys indicate that most areas will begin tapping around the 20th, with the earliest factories starting around the 16th, approximately one week earlier than the same period last year.

2.4 Hainan Production Area

With the arrival of spring in China, temperatures are gradually rising in Hainan, and the region has experienced slight rainfall. Rubber trees in Hainan are generally growing well, which is conducive to the timely progress of the tapping plan. According to surveys, Lingshui, Wanning, and Baoting areas in Hainan will be the first to begin tapping by the end of March, with a few areas in Baisha and Danzhou entering trial tapping. The main producing areas will begin tapping around the Qingming Festival. Overall, the expected tapping start in Hainan is currently in line with normal seasonal trends.

3. Analysis of Natural Rubber Cost and Profit Situation

3.1 Overseas Production Area: Thailand

The theoretical production profit of Thailand's STR20 fluctuated narrowly compared to the previous period. During the period, the price of raw material cup lump rubber continued to rise, providing strong cost support. Tensions in the Middle East and the depreciation of the Thai baht led to expectations of increased shipping costs, putting significant cost pressure on factories. The theoretical profit margin for Thai standard rubber saw a slight adjustment compared to the previous period, remaining at a loss.

3.2 Domestic Production Area: Hainan

Natural rubber production in Hainan is currently in its off-season; local processing plants are operating at low capacity, primarily relying on raw materials stockpiled in advance for the off-season.

4. Natural Rubber Demand Analysis

4.1 Downstream of Dry Rubber

The operating rate of semi-steel tires in China is 79%. The operating rate of all-steel tires in China is 72%.

Domestic tire manufacturers have largely recovered to normal production levels, providing some support for the overall operating rate. Furthermore, driven by expectations of price increases, all-steel tire manufacturers have seen active domestic sales and a faster pace of inventory reduction; semi-steel tire manufacturers have experienced relatively stable domestic and international sales, with overall shipments being relatively average.

4.2 Downstream of Concentrated Rubber Latex

It is understood that the average operating rate of glove factories in North China is roughly 50-70%, with differences between large and small factories. Affected by the sharp rise in nitrile rubber latex prices this week, the profit margin for nitrile glove production has narrowed significantly, and some companies have gradually expanded their natural rubber glove production lines. 

However, the current macroeconomic environment is experiencing increased volatility, with frequent fluctuations in futures markets. Coupled with the imminent start of natural rubber tapping in domestic producing areas, factories are generally cautious about purchasing raw materials at current prices.

The operating rate of foam factories in Wenzhou is roughly between 30-40%. Affected by rising raw material prices, factories are under significant cost pressure and have successively attempted to raise prices for finished products.

However, these price increases have suppressed new orders, and coupled with lower-than-expected order growth after the holiday, the overall operating pressure on the industry is prominent. At the same time, with the new round of domestic rubber tapping season approaching, factories are adopting a wait-and-see attitude, currently focusing on digesting raw material and finished product inventories, resulting in a generally weak willingness to purchase raw materials.

5. Natural Rubber Price Spread Chart

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