Rubber prices will remain high
Rubber prices will remain high
The price of rubber futures contracts on the Singapore Exchange (SICOM) has dropped 12% from a 3-year high reached a month ago, but is still above 200 US cents/kg, and is likely to increased even more. That is Commerzbank’s latest statement published on 3/3/2017.
This bank said that the rubber market recently dropped continuously because of the prospect that Thailand – the world’s largest producer and exporter – is about to resume latex harvesting after being interrupted since the beginning of the year. last fall due to prolonged heavy rain.
However, “Rubber inventories in China remain high affecting rubber price trends”, the Commerzbank report reads, adding that the country is still hoarding rubber as a raw material for the auto industry. his giant.
Indeed, car consumption in China for 6 consecutive months to November 2016 has always grown by double digits. Consumption in November increased 16.6% from a year earlier, reaching 2,938,700 units. Generally in the first 11 months of 2016, China’s auto consumption increased by 14.1%, reaching 24,948 units, exceeding the 24,597,600 units of the whole of 2015. This country’s Automobile Manufacturers Association forecasts that consumption will continue. continues to grow by about 5% more this year, hitting a new high.
China’s auto production in November also increased strongly, up 17.8% to 3.01 million units, surpassing 3 million units for the first time in history, equal to about 60% of full-year consumption in Japan. – the 3rd largest car market in the world after China and the US.
Very low rubber reserve
The data on the Chinese market shows that “the outlook for world rubber demand will be positive” in the context that the supply in many other producing countries is not high.
Indeed, rubber stocks on the Tokyo Exchange (TOCOM) fell to a 6-year low after floods in Thailand reduced output and rising prices in China scattered supplies. , increasing the risk that reserves at TOCOM could run out in just a few months.
Short supply after floods in Thailand caused rubber inventories at TOCOM bonded warehouses to drop to 1,489 tons as of February 20, the lowest level since August 2010, and lower than 79 % from a year earlier.
Supply has also been dispersed from Japan to China, the world’s largest rubber importer, where prices are always higher than Tokyo’s and demand is forecast to increase further after the year. Last year, the Government of this country introduced stricter regulations on the tonnage of cars in circulation.
Rubber inventories at TOCOM may drop below 1,000 tons after the February contract expires (101 lots, equivalent to 515 tons, moved out of warehouses). If the futures contract for March delivery still attracts the same interest as it is now, with 190 lots or 950 tons, and the April futures contract with 1,730 lots (8,650 tons), rubber reserves at TOCOM are about to return. theoretically will be gone within the next few months.
Decreased reserves can also put upward pressure on near-term futures contracts – which have consistently had five-year highs compared to long-term contracts in recent times.
Traders are concerned that if there is no new shipment to Japan soon, the price of the March and April futures contracts may skyrocket as happened with the monthly futures contract. 2.
February forward contract at TOCOM rose to 33 yen ($2.91)/kg on February 22, the highest level since August 2011 for a contract at expiration.< /div>
Price outlook is firm or bullish
The long-term outlook for the price of natural rubber is that the global supply is unlikely to be in excess. Rubber Economist forecasts that the market this year and next will be short for two consecutive years, after last year’s output was about 151,000 tons lower than demand.
The Association of Natural Rubber Producers (ANRPC) – which accounts for 96% of global production – forecasts the shortfall this year will reach 350,000 tons.
“Just a year ago, the price of natural rubber in Singapore traded at just over 100 US cents/kg, the lowest level since September 2003 after years of consecutive market oversupply”, Commerzbank said.
Assume that the market will be short as forecasted by Rubber Economist and ANRPC, “Price will continue to remain above 200 US cents/kg for a while longer”, and “the picture of supply – demand in the future. The near future looks unbalanced, the market is still in a tight state.”
Major producing countries of Southeast Asia are about to enter the “winter”, which is a period of low latex output, “making rubber prices more motivated to increase, at least in the near future” , Commerzbank forecast.
Source: Van Chi/CafeF/Child intellectual
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