Adverse Weather Worries Lift Rubber Futures

Rubber futures traded above 220 US cents per kilogram, hovering near the highest since February 2017, supported by elevated oil prices amid ongoing Middle East tensions and weather concerns in major producing regions. Natural rubber prices closely track crude oil, as higher oil prices make synthetic rubber more expensive and boost demand for natural rubber. In major Southeast Asian producers, including Thailand, Indonesia and Vietnam, monsoon rains since mid-May have disrupted agricultural activity and constrained output, with elevated temperatures amid climate change also weighing on production. Thailand is also under maximum environmental alert due to an intense “Super El Niño” phenomenon expected to trigger severe drought conditions in the country. Meanwhile, weak tyre demand from the Middle East continues to weigh on rubber consumption, as the region imports large volumes of Chinese-made tyres that rely on rubber as a key input.

Rubber futures traded around 220 US cents per kilogram in late May, moving sideways after retreating from a nine-year high of 232 US cents earlier this month, as traders continued to monitor supply conditions across key producing regions. Ivory Coast is set to enter its peak harvesting season, which could add to global supply, while heavy rainfall in Thailand has disrupted tapping activity and constrained output, limiting downside pressure. Meanwhile, weak tyre demand from the Middle East continues to weigh on overall rubber consumption, as the region is a major importer of Chinese-manufactured tyres, which are made from rubber. Elsewhere, sentiment around US–Iran talks has pushed oil prices lower, which could ease input cost pressures for synthetic rubber and reduce the relative attractiveness of natural rubber.

Rubber futures eased to around 220 US cents per kilogram in May, retreating from an over nine-year high as an earlier speculative-driven rally lost momentum. The rally had been fueled by concerns over tighter supply due to weather-related disruptions, with Thailand, the world’s largest producer, expected to see heavy rainfall, raising the risks of flash floods and river overflows in key southern rubber-growing regions. However, as prices climbed, elevated physical rubber prices began to squeeze margins for buyers and processors, weakening profitability and prompting end-users to scale back immediate purchases. This cooling spot demand fed back into futures pricing, with traders becoming more cautious on procurement and reassessing near-term demand strength. Meanwhile, higher crude oil continued to provide support, as Middle East tensions kept it elevated. This lifted synthetic rubber costs, making natural rubber more attractive.