1. Price Trend

According to the data from SunSirs.com, On November 1, 2019, the average domestic market price of natural rubber in China was 11,230 RMB/ton. And on November 25, the average market price was 12,116 RMB/ton, with the highest increase in the month 7.89%, after which the price pulled back. Up to November 29th, the price went back to 11,790 RMB/ton.

Three Ups And Two Downs 

Among them, the 12,116 RMB/ton on November 25th, in the 2019 market as per SunSirs.com, is the highest price of rubber prices so far.

Since 2019, the natural rubber market has fluctuated between 10,000 RMB/ton and 12,200 RMB/ton.

The overall price has risen three times: 12,070 RMB/ton on March 4 is the first-time high price, 12,020 RMB/ton on June 11 was the second-time highest price, and the price of 12,116 RMB/ton on November 25 was the highest price during the year.

There are two downward troughs: 10,700 RMB/ton at the end of April and early May was the first trough. The price of 10,260 RMB/ton from the end of July to the beginning of August is the lowest price this year.

Overall, November 2019 is a month of strong upward trend for the market. Until early December, natural rubber continued its November increase, with a short-term correction at high levels and shock consolidation. Until December 4th, stimulated by news such as the reduction of the Thai rubber strategy, funds continued to focus on natural rubber in the following days. At that day, the price of natural rubber increased significantly. Among them, rubber future in Shanghai commodity exchange has an increase at 400 point. After that, the price of spot natural rubber increased. In such market condition, the market transactions have some wait-and-see players.

5-month Low

The natural rubber that has been weak for several years has been oscillating for more than half a year in the low price range around 2,000 RMB/ton in 2019. It has fallen to its lowest level in June. Up to December 12, the price of natural rubber has last in low range for 5 month.

Meanwhile, the price of rubber continued to fluctuate for this 5 month in the second half of the year, experiencing the traditional consumption season defined as “Golden September and Sliver October”. In addition, associated with the impact of heavy rain and fungal diseases in Southeast Asia, the output of rubber was significantly limited. That made the natural rubber market began to improve from November.

November's Increase

In November, China's Yunnan began to enter the cut-off period. At this time, funds gradually favored natural rubber, and it rose sharply on the beginning of the second half of the day. Natural rubber finally stopped falling and began to rise. After the short-term correction at the end of November and the beginning of December, the price rose sharply on December 4.

Future Contract 

The contract RU2005 price rose 3.57% in a single day. The highest intraday price was 13,380 RMB/ton, which is the highest price during the year. The price No.20 contract NR2003 also rose sharply. The subsequent days followed the increase, and the purchasing side have strongly wait-and-see attitude. According to data from SunSirs, the lowest price of natural rubber (Hainan No. 1) in early December was 11,790 RMB/ton on the December 1st, and the highest point was 11,290 RMB/ton on the December 6th-80th, a 10-day increase at 4.2%. Natural rubber is still in a strong market trend.

2. Market Analysis

Domestic Supply

About one-third of the production area in Yunnan has been cut off at the end of November. And almost all of it has been cut off in early December. Hainan's production area will also be cut off from December.

Oversea Supply

Southeast Asia should be in the traditional peak season of production, but due to fungal diseases and the impact of rain some time ago. Overall output is expected to be affected in 2019. On the other hand, the International Tripartite Rubber Council (ITRC) report states that Rubber production in Indonesia and Malaysia is expected to decrease by 800,000 tons.

Associated with rain in the southern part of Thailand, the price of raw materials in Thailand has risen. Recently, the Thai government has just agreed 20-year rubber development strategy plan which was formulated by the ministry of rubber. Additionally, this strategy plan is aim to reducing rubber planting areas, increasing the average unit area output of rubber parks and plantation income, increasing the total amount of rubber export and increasing the domestic rubber use area. Further, they are dedicated in promoting the rubber industry and creating a framework for the development and solution of the entire rubber system. The news mention above has a strong bullish effect.

In general, the total output of natural rubber in domestic and foreign production areas is decreasing, stimulating prices continue to rise. And the recent support of the cost of raw rubber has a strong impact on the natural rubber market.

Inventory:

The data from the previous issue showed that on November 29, 2019, the natural rubber inventory of the previous issue decreased by 26.259 million tons to 222.8282 million tons. And the warehouse receipts decreased from 29.36.8 million tons to 167.2 million tons. In the week of December 6, natural rubber inventory at 255,200 tons. The warehouse receipt amount on December 10th was 184,600 tons, a small increase from the end of November. By comparison, the current rubber stocks in the previous period are still low. It is reported that the inventory in Qingdao area has rebounded slightly recently. Changes in natural rubber stocks have a strong support to the recent natural rubber market, but generally have not entered the state of destocking.

Import and export:

China's customs data shows that in October 2019, China's natural and synthetic rubber (including latex) imports were 500,000 tons, a decrease of 8.4% from last month's 546,000 tons. From January to October, China's natural and synthetic rubber (Including latex) imports totaled 5.213 million tons.

In Southeast Asia, Thailand’s natural rubber exports in October fell by 24% year-on-year and increased by 8% month-on-month, benefiting from Thailand’s four-month export restriction order expired at the end of September. Thailand said it adopted policies to support rubber farmers.

Demand

The current operating rate of downstream tire companies is about 70%. The demand for rubber procurement also needs to consider seasonal factors and environmental protection factors. Under the situation that the market expects the market to have a strong upward trend, the purchasing side will generally wait and see.

Data show that in November 2019, China's heavy truck market is expected to sell about 94,000 vehicles of various types, up 3% month-on-month and 5.3% year-on-year. Overload management and the elimination of the National Three Vehicles have led to an increase in new car purchases.

Winter is the seasonal off-season season for tire sales. In November, tire sales both declined month-on-month and dealers were under greater pressure. However, there was usually a demand for stocking downstream a year ago, and there may be short-term support for the market.

3. Market Forecasting

The natural rubber analyst of the SunSirs believes that the total output of natural rubber has tightened compared with previous years. And the inventory has been relatively low in recent years. Recently, heavy truck sales have been good, and downstream procurement has been relatively stable. The stocking demand before the year will usually have some support, and the market outlook is stronger. Expectations are strong. The recent market turbulence, the price has not been reduced much, short-term positive factors exist, and the price of spot rubber is firm.

If you have any questions, please feel free to contact SunSirs with support@sunsirs.com