Will we have to get used to high and volatile prices?

Natural rubber continues to remain unstable, and the anticipated correction for the fourth quarter has yet to materialize. Supply remains stagnant, while on the demand side, China is increasing its purchases. This is reducing inventories to concerning levels. Looking ahead, the latest reports foresee low production growth in the coming years, which could sustain high prices for a longer period. Could prices go down? Perhaps, but only if production recovers before the low season.

New global growth projections: China slows down but continues growing; the United States shows resilience

The IMF released its new projections for global economic growth, maintaining its outlook for a global GDP growth of 3.2% in 2024 and 2025. Projections for the United States and China were improved, while Europe’s projections were revised downward.

In the specific case of China, the primary importer of natural rubber, the forecast is 4.8% for 2024 and 4.5% for 2025 (previously projected at 4.1%). As we have been noting, the growth slowdown of the Asian Giant is clear, and it won’t meet the government’s growth targets. Nonetheless, this is a gradual process without a crisis.

Inventories in China continue to decline

Rubber inventories in China have reached their lowest level since February 2024, indicating an improvement in domestic demand. This is concerning, as we could enter 2025 with very low stock levels, which would keep prices elevated.

Two studies project stagnant supply in the coming years

A recent publication from the Association of Natural Rubber Producing Countries and a study presented at the RubberMove conference have warned of the deceleration in rubber supply growth.

The main issues are the aging of plantations and the low interest among producers in expanding planting areas, as they prioritize more profitable crops. This suggests a market deficit of between 600,000 and 800,000 tons by 2028. Thus, we may be close to witnessing a cycle of high prices in the coming years, as long as demand continues to grow (key to this will be avoiding an abrupt slowdown in China’s growth).