Impact of Prices on Supply

Supply restrictions due to Southeast Asian rains remain the main driver of prices. Not only has the evacuation of production continued to be limited, but new weather forecasts indicate heavy rains in major producing regions throughout September, so the outlook will remain challenging.

As a result, prices for natural rubber and latex extended their positive trend this week, reaching levels not seen since the end of the low production season.

Production in Asia is expected to face challenges throughout September.

It is forecasted that rubber-producing regions in Thailand, Vietnam, and Cambodia will receive heavy rainfall, disrupting extraction over the next month.

Additionally, Indonesia is expected to receive normal or slightly above-normal rainfall until September 27.

The first three countries will face significant impacts on their rubber production, while the latter will experience a lesser effect.

With this extended forecast, the recently initiated cycle of high prices for natural rubber and latex may extend longer than anticipated.

The Association of Natural Rubber Producing Countries has revised its production projection for 2024 downward. Although it remains relatively optimistic compared to other sources, it anticipates demand growing at a much faster rate than supply this year (2.1% vs. 0.4%).

The Federal Reserve announces rate cut, sparking local investor optimism.

Although the final decision will be confirmed on September 17/18, Powell, the chairman of the U.S. Federal Reserve, cleared doubts and declared that “the time has come to lower interest rates.”

This triggered price increases in most financial assets and some commodities, including natural rubber, as lower rates are associated with higher demand (due to economic growth) and a slightly weaker dollar. It remains to be seen whether the cut will be 0.25 pp or 0.5 pp (percentage points).