IRSG: Natural Rubber Prices Hit Multi-Year Highs, Short-Term Correction Pressure Expected(Oct 9)

IRSG: Natural Rubber Prices Hit Multi-Year Highs, Short-Term Correction Pressure Expected

Q3 Price Rally Accelerates

The International Rubber Study Group (IRSG), in its October natural rubber market review, noted that natural rubber prices rose significantly in 2026, reaching multi-year highs. In the short term, high prices may stimulate increased tapping and ease supply gaps, but aging rubber trees and insufficient replanting are compressing the long-term supply buffer, creating a "structurally firmer" price environment. 

IRSG stated that 2026 natural rubber prices were driven by supply tightness, firm consumption, high crude oil and synthetic rubber prices, and weather uncertainty, with the rally accelerating notably in the third quarter. In September, Indonesian SIR20 prices rose 39% year-on-year, Thai STR20 rose 33%, Malaysian SMR20 rose 34%, European TSR20 rose 68%, and Indian RSS3 rose 46%. IRSG also warned that the ongoing El Nino event constitutes another potential supply risk.

Short-Term Supply Buffer Could Ease Prices

IRSG believes the current supply gap does not represent absolute capacity shortage. Global natural rubber production potential at full tapping is approximately 19.6 million tons, while current output is about 15.1 million tons, meaning a substantial buffer of mature but untapped capacity remains. If prices stay high, farmers' production willingness will increase, driving untapped plantations into production and raising tapping intensity and frequency, potentially leading to a relatively rapid supply recovery that could pressure prices downward, especially if supply recovery coincides with weakening downstream consumption.

Additionally, high crude oil and petrochemical feedstock prices support synthetic rubber prices, reducing the substitution pressure on natural rubber. If oil prices fall, this support will also weaken.

Long-Term Structural Firmness

IRSG warned that the long-term market landscape could be markedly different. Global natural rubber output grew from approximately 10.1 million tons in 2007 to 13.9 million tons in 2018, after which growth slowed significantly, with 2025 output at only about 15 million tons. Existing rubber trees are gradually aging, and insufficient replanting and new planting will continue to weaken future capacity, while newly planted trees require years before reaching tapping age.

On the demand side, fundamentals remain expansionary: global vehicle ownership is projected to grow from approximately 1.74 billion units in 2026 to about 1.86 billion by 2030, and annual tire production is expected to grow from approximately 2.06 billion units to 2.19 billion. Even with moderate new vehicle production growth, continuously growing vehicle ownership will drive expanding replacement tire market demand. The electrification transition also profoundly affects natural rubber demand -- new energy vehicles are heavier with higher torque output, requiring more stringent tire performance standards, driving changes in tire structure design and material requirements, and boosting natural rubber consumption.

IRSG emphasized: "Today's shortage can be resolved by tapping more existing trees; tomorrow's shortage may require trees that have not yet been planted today." As the supply buffer narrows, prices will become more vulnerable to short-term climate disruptions such as floods, persistent rainfall, drought, and extreme heat.

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