Latex follows the decline in natural rubber

Investment fund sales in China led to a drop in natural rubber (TSR20) prices last week, and latex followed the trend with a slight delay. The Japan Exchange Group reports that these sales continued, which, combined with expectations of a supply recovery, is exerting downward pressure on prices.

However, it is important to note that production is unlikely to be strong in December, and there is an observed increase in demand from the automotive sector in China, where activity is capping off a strong final quarter of the year.

Given this outlook, we do not expect a steep decline in prices in the early part of the year unless the initial measures taken by Trump as president in late January significantly dampen market sentiment.

Rubber prices | U$S/100Kg

The Chinese economy continues to support natural rubber demand.

Despite its ongoing structural issues and struggles to boost private consumption, China is closing the year stronger than expected. Evidence of this is the World Bank’s upward revision of its economic growth forecast for this year by 0.1 percentage points, reaching 4.9% (with just one quarter left to be published).

Additionally, the World Bank has increased its GDP growth projection for next year from 4.1% to 4.5%. The strongest performance has been observed at the industrial level, particularly in the automotive sector, which is expected to finish the year on a high note. Preliminary reports indicate a 25% year-on-year increase in cumulative sales from December 1 to December 22.

Despite improved weather, poor production expected in December.

According to the Japan Exchange Group, improved seasonal weather in rubber-producing countries is one of the factors driving the decline in natural rubber futures prices. However, the situation in some southern regions of Thailand remains compromised by flooding.

Sukthat Tangviriyakul, Deputy Governor of the Rubber Authority of Thailand (RAOT), stated that flooding continues to affect 11 provinces in the southern region, which is a key area for rubber plantations, representing approximately 80% of Thailand’s total annual production.

Market surpluses will drive oil prices down in 2025.

Most analysts agree that the most likely scenario is that crude oil prices will decline to levels closer to USD 70 in 2025 (currently around USD 75).

This is due to a slowdown in oil demand, particularly in China, where the significant penetration of electric vehicles is reducing fuel purchases.

For now, the Organization of the Petroleum Exporting Countries (OPEC) has been supporting the market with production cuts and has once again delayed its promised increase of 2.2 million barrels per day. However, at some point, production will need to rise. Lower oil prices negatively impact synthetic rubber prices and, consequently, natural rubber prices as well.