Natural rubber prices rebound in a week with little activity

During a week of limited activity due to the holiday season, natural rubber prices experienced a moderate increase. In contrast, latex prices remained largely unchanged. The market appears slightly more optimistic about demand from China, influenced by December’s service and construction data, as well as remarks from Xi Jinping. Additionally, supply shortages continue to provide a floor for prices.

Despite improved weather conditions in mid-December, production data confirms a significant decline in Thailand's supply. Low supply levels and reduced inventories are expected to keep prices high in the coming months. However, a potential decrease in prices could occur in the second half of the year if 2025 brings more favorable weather compared to 2024.

Precios caucho | U$S/100Kg

Supply shortages in early 2025 may be short-term

The supply of natural rubber is expected to remain highly constrained at the start of 2025. December production data from Thailand shows a significant decline. According to local authorities, production fell by nearly 30% due to heavy rains and flooding in southern provinces, where approximately 953,600 hectares were affected.

While a steep decline had already been anticipated, the actual figures are worse than expected. It’s also worth noting that natural rubber inventories remain at historically low levels, similar to those seen in 2023. As a result, January is likely to remain marked by supply shortages.

What is the hope for 2025? The expectation is that weather conditions will improve compared to 2024. Without the El Niño phenomenon, the high temperatures of the first half of the year are unlikely to recur. Although floods are common, 2024’s Typhoon Yagi was one of the most intense in decades. With more normal weather in 2025, there should be less pressure on prices unless there is a significant increase in demand.

Growing optimism about China's economy

The market appears increasingly optimistic about the recovery of China’s economy. Preliminary December data showed significant growth in services and construction, according to the PMI survey.

The industrial sector, however, saw growth but underperformed relative to expectations. Another factor influencing the market is the statement from China’s president announcing a 5% growth target for 2025. This goal was interpreted as an indication of likely economic stimulus, leading to expectations of stronger growth.

Despite this week’s improvement in market sentiment, uncertainty regarding China remains, with divided opinions in many cases. More clarity is likely to emerge in February, after Trump takes office and announces his initial trade policy measures.