Adverse Weather Worries Lift Rubber Futures

Rubber futures traded around 235 US cents per kilogram, holding close to their highest since 2013, amid intensifying supply concerns. Thailand, the world’s largest natural-rubber producer, has been hit by heavy rain and typhoons, disrupting tapping and pushing up raw latex prices. Forecasts of further rainfall could prolong disruptions, while the end of Southeast Asia’s peak tapping season in September is expected to tighten supplies as shipments slow. Moreover, the risk of a strong El Niño in the fourth quarter adds to concerns over production, with the weather pattern potentially reducing yields across major producing regions. Meanwhile, lower oil prices amid renewed hopes of a Strait of Hormuz reopening limited the upside.

Rubber futures traded above 230 US cents per kilogram, the highest since early June, supported by elevated oil prices and the anticipated seasonal reduction in supply. Traders looked ahead to tighter supply once Southeast Asia’s peak tapping season concludes in September, when shipments are expected to slow. Output typically undergoes a season of low production from February to May, before a peak harvesting period that lasts until September. In the meantime, top producer Thailand is facing adverse weather conditions, with intermittent rainfall disrupting rubber tapping operations. Meanwhile, uncertainty over the Middle East conflict and the reopening of the Strait of Hormuz kept crude prices elevated, making crude-based synthetic rubber less competitive. On the demand side, however, sluggish Chinese auto sales continued to weigh on tyre demand and rubber consumption.

Rubber futures rose to around 223 US cents per kilogram, near a two-week high, as higher oil prices supported natural rubber by making crude-based synthetic rubber less competitive. However, gains were capped by improving supply prospects, with Malaysia’s natural rubber production jumping 31.5% month-on-month in June. The increase reflected the peak harvesting season, which typically runs from June through September. China remained the largest destination for Malaysian natural rubber exports, accounting for 55.8% of total shipments, highlighting its importance to regional demand. Still, weaker Chinese auto demand continued to weigh on the outlook, with subdued tyre demand and elevated vehicle inventories. Meanwhile, longer-term supply concerns offered support, as Indonesia, the world’s second-largest rubber producer, saw farmers increasingly switch from rubber to palm oil, reducing production capacity and potentially tightening global supplies.