Rubber Trades at 3-Week High

Rubber futures rose above 218 US cents per kilogram in mid-July, reaching a three-week high as rainfall in key producing regions disrupted near-term latex harvesting. Still, analysts noted that the weather-related disruptions are unlikely to offset the broader seasonal increase in supply. Thailand, the world's largest rubber producer, has entered its peak tapping season, with output in the south beginning to recover as rainfall eased in late June and early July. Elevated oil prices also supported natural rubber by making synthetic alternatives more expensive. However, gains were capped by EU anti-dumping duties on Chinese tire imports, raising fears of weaker natural rubber consumption. Additional pressure came from China's slowing economic growth and a ninth straight monthly decline in vehicle sales in June.

Rubber futures held above 217 US cents per kilogram, supported by concerns over tighter near-term supply. Although key producing region of Southeast Asia is in its peak season, persistent rainfall across Thailand, Indonesia, and Vietnam has disrupted harvesting and delayed supplies to the market. Additionally, rising oil prices added support, as higher crude costs increase the production cost of petroleum-based synthetic rubber, improving the competitiveness of natural rubber. However, gains were capped by mounting demand concerns after the European Commission imposed anti-dumping duties of 4.3% to 45.3% on imports of passenger car, light truck, and bus tires from China, raising fears that weaker Chinese tire exports to the EU could curb natural rubber consumption. Adding to demand concerns, China's vehicle sales fell for a ninth consecutive month in June.

Rubber futures rose to near 218 US cents per kilogram, up from recent two-month lows of $208.6 cents per kilogram, on short covering and rising prices of crude oil. Because synthetic rubber is made from petroleum, higher oil prices increase its production costs, encouraging manufacturers to switch to natural rubber. At the same time, Liberia's ban on raw natural rubber exports fueled concerns over tighter near-term supply, with global inventories already running low. Southeast Asia, the world's top rubber-producing region, is currently in its mid-season harvesting period, but heavy monsoon rains have been disrupting operations. However, persistent weak demand prospects in top buyer China limited the upside. Chinese broker Gouxin Futures said the semi-steel tire segment remains under pressure as manufacturers contend with weak new-order expectations and rising inventories. It added that some manufacturers have begun maintenance shutdowns this month, reducing near-term rubber demand.