Natural rubber and latex prices have been rising in the final weeks of the year, driven by expectations of a decline in inventories in the coming months. The lower strength of the dollar, optimism about the economic recovery in the West and the good results of the automotive industry in China also have an influence. This situation presents an interesting opportunity: considering the moderately bullish outlook for the start of 2024, it could be a key time to get ahead and make strategic purchases, before prices continue their climb. This action could represent an intelligent and timely decision for those seeking to invest and secure their resources.
WHAT IMPACT WILL THE CHINESE AUTOMOTIVE INDUSTRY HAVE ON THE RUBBER MARKET?
The economic situation in China presents a series of varied trends. A new decline in the industry is expected for December. However, automobile sales, key to rubber demand, once again escape the negative trend with a projected increase of 17% year-on-year driven by electric vehicles. According to the Chinese Association of Automotive Manufacturers (CAAM), automobile sales are expected to increase by 11% this year, reaching 30 million units, and this figure is expected to rise to 31 million by 2024.
IS A SHORTAGE LOCING IN THE NATURAL RUBBER MARKET IN 2024?
The consulting firm Whats Next Rubber projects a deficit in the natural rubber market of 1.38 million tons during the low season of 2024 (January to June), motivated by limited supply and an increase in global demand. According to its production data, the accumulated surplus during the high season of the end of 2023 (July to December) was 709 thousand tons. This will lead to some shortages in the first half of 2024, driving prices higher. It is important to mention that Whats Next Rubber's projections for 2023 production have generally been lower than those published by other entities, such as the Association of Natural Rubber Producing Countries (ANRPC), suggesting that the actual shortfall could be somewhat . less than anticipated.
WHAT HAPPENS TO THE DOLLAR?
The dollar is losing strength globally due to the anticipation of a reduction in interest rates. Since the beginning of November, this trend has been constant. So far, the dollar index, which compares the strength of this currency against other currencies, has decreased 5.5% since its peak reached on November 1.
INTERNATIONAL FREIGHT
According to the vast majority of indices, rates show a significant increase globally in the last fortnight of December. This is a foreseeable response to the disruptions caused by the diversion of ships through southern Africa due to attacks in the Red Sea. For now, the impact is limited to the northern hemisphere and is not felt on the Asia-South America route, which this week adjusts downwards contrary to the rest of the world.