In January, the price of latex experienced a notable increase, exceeding 12% in just one month. In contrast, natural rubber (TSR20) had more moderate growth, reducing the price difference between the two to a historical minimum. This increase in latex is mainly due to lower availability of the product, affected by restrictions on its supply in both Southeast Asia and Africa. This could sustain elevated prices in the coming month even as China's economic outlook appears to be worsening.
Chinese Industry: Growth Prospects for 2024
Chinese industry shows signs of contraction in January, according to the latest official indicator
. This trend has led the market to adopt a more pessimistic stance, with the IMF adjusting its growth expectations for 2024 to 4.6%. Despite this panorama, the automotive sector continues to drive demand, standing out as a bright spot in the economy.
The Federal Reserve and the Future of Interest Rates
Although the Federal Reserve has paused raising rates, no cuts are yet anticipated. This decision keeps the market in suspense, expectant of possible future movements that could impact various investments and financing costs.
Rubber Supply: Outlook for the First Quarter
The availability of natural rubber faces restrictions in the first quarter of the year, with Thailand seeing limited supply due to rains and Ivory Coast imposing export restrictions on raw rubber. These factors contribute to maintaining tight supply, which could influence the rise in prices at the level
global.
Crisis and Expansion: The Contrast in Rubber Demand
Real Estate Crisis in China:
The Chinese industry faces a new setback with the contraction in January and the deep crisis of the real estate sector, marked by a 23% year-on-year drop in property sales and the bankruptcy of the giant Evergrande, which could not agree on a program restructuring of its debt.
Economic Outlook: IMF adjusts China's growth expectations for 2024 to 4.6%, a notable slowdown from 5.2% in 2023, projecting even slower growth for 2025 to 4.0%.
Impact on the Rubber Market: Despite the slowdown, the natural rubber market is not contracting thanks to the rise of electric cars, driving demand for tires. Auto sales in China closed 2023 up 12%, with January showing 47% year-on-year growth.
Sustained Global Demand: Demand for rubber remains strong globally, with the US industry resuming its expansion and Europe showing an increase in auto sales. The US Federal Reserve has left interest rates stable.
Long-Term Projections: Despite current challenges, the natural rubber market is expected to grow at an annual rate of 4.7%, reaching a value of USD 30.9 billion by 2033, according to a study by Future Market Insights.
Restrictions in Ivory Coast: The recent ban on exporting natural rubber in primary forms has put pressure on prices globally. Although factories can still export surpluses, the objective of enhancing the internal processing of the product is reconfiguring the dynamics of supply. This measure has driven up prices throughout the value chain, particularly for primary products rather than more processed ones.
Impact of Weather Conditions: Heavy rain has temporarily disrupted production in Thailand, while the threat of an unfavorable harvest season in 2024 keeps price expectations high.
Climate Forecasts and Their Effect on Production: The potential early arrival of winter could significantly affect the availability of natural rubber from Thailand, Africa, Vietnam and Indonesia, anticipating shortages in the international market.
Uncertainty towards the end of the year: While El Niño poses known challenges for production in Southeast Asia, the possible change to La Niña in the second quarter adds a layer of uncertainty to the production and supply outlook towards the end of the year.