Continued price increases for Rubber and Latex globally

Climate issues remain relentless in Asian countries, revealing a much worse scenario than expected. After Typhoon Yagi, several rubber and latex-producing areas have been flooded. At the same time, there has been a surge in demand from the Asian giant, further driving up prices. This week, China launched an aggressive package of measures to revive the country's activity.

China's economic stimulus and floods extend price increases. How long will this last?

Natural rubber and latex prices continue their upward trend, accumulating increases of up to 12% and 15% in the last month, respectively. Persistent supply issues have now been compounded by the announcement of economic stimulus measures in China, leading to speculative buying. While prices will remain high until there is an improvement in weather conditions in Southeast Asia, they have already reached unusually high levels, and it would not be surprising if investors choose to sell to realize profits. If this happens, we could see a price decline in the coming weeks.

In pursuit of a 5% growth target, China launches the most aggressive stimulus package since the pandemic.

The package of measures was broader than expected, including interest rate cuts, reduced requirements for accessing mortgages, an unprecedented share buyback program, and a credit program that will allow institutional investors to borrow against their own shares as collateral.

Chinese stocks reacted very positively, leading to a surge in speculative buying of natural rubber, further driving prices. However, some analysts question the effectiveness of the policies, calling for more fiscal stimulus rather than so many monetary measures, as China’s main issue does not appear to be liquidity.

For now, the measures have generated some optimism in the market, but no concrete improvements have been observed. Regarding rubber demand, there has been a year-on-year decline of 5% in automobile sales. Despite a 25% improvement in exports, domestic sales remain relatively stagnant in recent months and have not recovered to late 2023 levels.

Dramatic climate situation in Asia

Typhoons and tropical storms continue to restrict supply in Thailand, Vietnam, and southern China. The situation is much worse than expected a few months ago, especially due to the devastating impact of Typhoon Yagi (the largest recorded in China since 1949) in Vietnam, Thailand, and more recently, Myanmar.

The worst seems to have passed, but several areas remain flooded, and it will take time to restore production.