Continued Issues with Rubber and Latex Production

Natural rubber and latex prices continue to rise due to supply shortages in Southeast Asia.

To a lesser extent, a slight increase in purchases from China and a weak dollar also pushed prices higher. While the price trend was expected, the increase has already exceeded recent forecasts. Even so, it could continue in the short term, as new climate complications are projected for next week.

Supply remains low, with no improvement expected this week.

The main bullish factor for natural rubber prices is the supply, which remains unusually low in most Southeast Asian markets.

The biggest impact is due to production disruptions in Thailand, which are expected to continue in the coming days. In this regard, the meteorological agency of Thailand's main rubber-producing region warned of heavy rains that could cause flooding from August 21 to 27.

Supply issues are also observed in China, associated with the leaf blight disease affecting plantations in Yunnan.

In India, where the shortage is most severe, prices began to fall this week, but only due to the arrival of imports, which adds more upward pressure on the international price.

Chinese car exports continue to grow, but do not offset the drop in local sales.

China's automobile sales faltered in July, dropping 5% compared to the previous year.

A total of 2 million units were sold, of which 1.6 million were sold within China (a year-on-year drop of 10%) and 0.4 million were exported (a 20% increase). These figures show the weakness of Chinese demand, which has yet to recover, but also the strong competitiveness of automakers on a global scale.

China's natural rubber imports may have grown in June, but overall remain at low levels.

Dollar depreciation, another factor driving prices up.

The dollar index, which shows the relative strength of the dollar against all other currencies, fell just over 1% last week.

This is due to the expectation of a rate cut in September, which is increasingly likely. This expectation is pushing (in advance) commodity prices like natural rubber up in two ways.

First, because it generates expectations of higher demand and encourages riskier investments. Secondly, because it causes a depreciation of the U.S. currency, leading to higher prices measured in dollars.