Rubber Futures Trade Sideways

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.

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.