Rubber Futures at 2-Month Highs

Rubber futures rose to near 225 US cents per kilogram, the highest in two months, 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 undergo 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.

Rubber futures traded around 219 US cents per kilogram in mid-August, remaining range-bound since early July amid a lack of clear market direction. Higher oil prices provided some support to natural rubber by reducing the competitiveness of crude-based synthetic rubber, as concerns over the reopening of the Strait of Hormuz underpinned crude prices. However, persistent weakness in China’s domestic auto market, the world’s top rubber consumer, continued to cap gains amid concerns over tyre demand and rubber consumption. Domestic car sales fell 21.1% year-on-year in July to 1.47 million vehicles, marking a tenth consecutive monthly decline, although the pace of contraction eased. Meanwhile, vehicle exports surged 88.2% as automakers increasingly looked to overseas markets to offset intense competition at home.