Natural Rubber Market: Supply-Demand & Factors Analysis

The settlement price of the Shanghai Futures Exchange's natural rubber continuous contract was 14,730 yuan/ton (unchanged from the previous day); Qingdao spot rubber prices ranged from 14,700 to 14,950 yuan/ton (a monthly increase of 2.48%); and the main synthetic rubber contract was 11,820 yuan/ton, with a price spread of 2,910 yuan/ton.

Major producing areas in Southeast Asia are under significant pressure. Continued rainfall in southern Thailand, coupled with clashes in the northeastern provinces of Surin and Sisaket, has disrupted rubber tapping, leading to an estimated production reduction of 26,200 tons in July and August.

A more far-reaching impact comes from the policy of delaying the start of the tapping season in May, with annual supply projected to plummet by 200,000 tons. Despite a 2.4% year-on-year increase in production in southern Thailand to 2.78 million tons, the high price of rubber at 54 baht/kg (a 3.2% year-on-year increase) highlights the current shortage of raw materials.

The global deficit continues to widen. Indonesia's production plummeted 9.8% to 2.04 million tons due to rubber farmers switching to oil palm. Vietnam's production fell 1.3% to 1.28 million tons due to aging plantations. Malaysia's output fell 4.2% to 370,000 tons. Although China's production increased by 6% to 933,000 tons, demand grew by 8.5%, and its dependence on imports remained over 80%.

Production in Africa, such as Côte d'Ivoire, surged 48%, but the small base made it difficult to offset the shortfall. Inventories presented a mixed bag. Qingdao Free Trade Zone inventories fell to 88,900 tons (down 3,000 tons weekly), while general trade inventories stood at 527,200 tons (down 5.6% year-on-year), reflecting tight spot liquidity.

However, Shanghai Futures Exchange warehouse receipts remained high at 210,800 tons, indicating that the futures market remains constrained by macroeconomic sentiment, resulting in a divergent pattern of "destocking in the bonded areas and accumulating in the futures market."

China's tire market is driven by two factors: 694,000 vehicles were exported in July (a year-on-year increase of 19.7%), while sales of new energy vehicles reached 986,000 (a 23% increase), driving a 12% month-on-month increase in tire export orders.

Shandong's full-steel tire production capacity utilization rate remained high at 61.06% and semi-steel tire production at 74.63%. With the domestic vehicle ownership exceeding 330 million, replacement tire demand has risen to 65%, becoming the main driver of demand.

The European and American markets are showing signs of improvement, with US light vehicle sales increasing by 7.4%, with electric vehicles accounting for a record high of 10.9%. Sales in Canada increased by 6.9%, with Japanese and Korean SUVs contributing the majority of the growth.

Although Europe is impacted by adjustments in chip inventories, tire procurement has already begun for the electric vehicle ramp-up plan in the second half of the year. The substitution landscape is quietly shifting. China has imposed anti-dumping duties ranging from 13.8% to 40.5% on halogenated butyl rubber from Canada and Japan, projecting an annual reduction of 80,000 tons in imports.

Natural rubber's use in innerliners is increasing. As the price gap between synthetic rubber and natural rubber narrows to 2,910 yuan/ton, the economic viability of substitution has declined, leading some companies to reduce their natural rubber mix to above 55%.

International oil prices fell to $63.50 per barrel (the lowest since late June). Weaker butadiene prices have squeezed butadiene rubber production margins to -500 yuan/ton, and the operating rate of private plants has fallen to 55%.

However, a 235 yuan/ton increase in domestic refined oil prices has supported tire companies' gross profit margins per ton to remain in the 800-1,200 yuan range. The probability of a Federal Reserve rate cut in September is 91.5%, the US dollar index has fallen to 102.5, and the RMB has appreciated to 7.05, reducing import costs by approximately 3%.

China's social financing increased by 3.81 trillion yuan in July, infrastructure investment growth rebounded to 6.2%, and commercial vehicle tire demand improved by 5% month-over-month.

The Thai-Cambodian border conflict increased raw material transportation costs in Surin Province by 15%, forcing some processing plants to suspend purchases. Indonesia's proposed 5% resource tax on rubber exports (not yet implemented) has sparked concerns about rising supply costs.