Rubber prices dropped by 6.1% this week, primarily due to Chinese investment groups liquidating their long futures positions. This type of activity will continue to generate market volatility. Latex prices, however, showed greater resilience, with only a 1.2% variation.
Other variables also exerted downward pressure, and while high prices are still expected, the upward trend observed in December is likely to slow. China's economic data for November fell short of expectations, and the dollar appreciated following a Federal Reserve announcement forecasting fewer rate cuts in 2025. Additionally, a week of limited rainfall allowed water levels to recede in producer countries.
Precios caucho | U$S/100Kg
Funds Unwind Positions in China
Relief as Rainfall Subsides
While some areas remain affected, flooding in Thailand, Vietnam, and Malaysia has eased, with only scattered rainfall reported last week. This has led to a slight recovery in supply and a downward correction in natural rubber prices.
Price Growth Outlook for 2025
The report warns that the biggest risks are on the downside, especially if an oversupply of automobiles in China forces a reduction in production.
Federal Reserve (FED) Cut Rates, but the Impact Was Unexpected
The FED reduced its benchmark interest rate by 0.25%, bringing it to a range of 4.25%-4.50%. This typically weakens the dollar and boosts commodity prices.
However, the opposite occurred, with the dollar appreciating by 1.5% against other currencies. This was because the rate cut had already been priced in by the market, which instead focused on another detail: the FED now forecasts only two additional rate cuts next year, fewer than previously anticipated. While the Federal Reserve cannot make political statements, the expectation of an expansionary fiscal policy under Trump appears to be making the FED more cautious about cutting rates further.