Rubber and latex prices reached their peak in early October, mainly driven by supply shortages. It took until the end of the month for climatic improvements to slow the upward trend and trigger a price drop.
Donald Trump's election as President of the United States also contributes to the decline, as it could worsen the trade conflict with China. Nonetheless, low rubber stocks continue to put a floor on the price drop.
We continue to expect a slightly downward short-term trend, but still with relatively high price levels for the summer of 2024/25.
MARKET BALANCE AND PRICES | In USD per 100Kg | August 2024 to November 2024
COMMODITIES SUPPLY AND DEMAND
DEMAND: China's industrial activity grew slightly in October according to the PMI index, showing its first expansion since April, possibly due to economic stimulus measures. The real estate market remains stagnant, prompting new tax reductions for property purchases. Expectations were high for fiscal incentives following the Congress, but the announced USD 1.4 trillion debt package for local governments (8% of China's GDP) was considered moderate. Meanwhile, Donald Trump's victory in the U.S. poses risks for China due to the strengthening dollar and potential protectionist policies with high tariffs, which could negatively impact China's economic growth and demand for commodities, such as natural rubber.
SUPPLY: The production of major Asian rubber producers fell by 5.3% year-on-year in August, with Malaysia reporting a 5.6% contraction in September, and Vietnam affected by Typhoon Yagi. At the end of October, weather conditions in Thailand improved, with projections of reduced rainfall in November, facilitating production, while Malaysia and Indonesia continued to be affected by rain. Although supply remains limited, there could be a slight downward correction in prices due to weak demand conditions.
MOST RELEVANT GLOBAL NEWS
Internationally, the main headline was Donald Trump's victory in the U.S. elections. Both fiscal and foreign policies could have a bearish effect on commodities. In the specific case of natural rubber, there could be a bearish impact if the aggressive protectionist policy aimed at reducing imports of Chinese products is confirmed.
WHAT IS HAPPENING IN CHINA?
Meanwhile, in China, expectations were focused on the meeting of the main legislative body, but the announced stimulus measures were between "expected" and "a disappointment," resulting in a bearish effect on prices.