Rubber Futures Climb Over 4%

Rubber futures surged more than 4% to above 230 US cents per kilogram in mid-May, hitting a fresh high in more than nine-years, propelled by expectations of tightening supply due to weather-related disruptions. Thailand, the world’s leading producer, is expected to see heavy rainfall over the coming week, according to the national meteorological agency, which also warned of possible flash floods and river overflows in the southern regions where most of the country’s rubber plantations are located. Prices were also supported by higher oil prices, as fading hopes of a quick resolution to the Middle East conflict kept crude elevated. Natural rubber prices tend to track oil, since higher crude costs increase synthetic rubber production expenses, making natural rubber more competitive.

Rubber futures rose above 220 US cents per kilogram in mid-May, reaching a fresh high since February 2017, driven by supply concerns linked to weather conditions. The rainy season had now officially begun in Thailand, according to the Thai Meteorological Department, raising risks of damage to large plantation areas and reducing output from the key producer. Markets are also monitoring stronger El Niño forecasts across other producing countries, expected to be the most severe in a decade. Although rubber trees are relatively resilient, analysts warn that prolonged dry conditions could still reduce yields. Meanwhile, higher oil prices continue to provide support amid escalating tensions in the Middle East, as they increase the cost of synthetic rubber production and make natural rubber relatively more attractive. Limiting gains, however, was weak Chinese vehicle demand, which reduces consumption of rubber used in tire manufacturing.

Rubber futures climbed above 220 US cents per kilogram in early May, hitting a fresh high since February 2017, driven by concerns over supply shortages from weather disruptions. Supply tightness fears rose after Thailand’s meteorological agency warned of storms from May 7–12 that may cause damage and flooding in key regions. Market participants are also tracking stronger El Niño forecasts, expected to be the most severe in a decade. While rubber trees are relatively resilient, analysts note prolonged dry conditions could still cut yields. Meanwhile, China has introduced a zero-tariff deal with 33 African nations, including Ivory Coast, but the China Rubber Industry Association said natural rubber is excluded from tax exemptions. Elevated oil prices also added support, as rubber prices are closely tied to crude oil. Higher oil prices increase production costs for synthetic rubber, making natural rubber more attractive.