Current crude oil prices are weak, and the expansion of domestic synthetic rubber production capacity has added pressure to synthetic rubber prices, with the price difference between natural rubber and synthetic rubber rising to a ten-year high.

The current price spread between natural rubber and synthetic rubber has increased to a ten-year high. If the subsequent crude oil prices continue to fall or the profit margin of butadiene rubber continues to decline, the price spread between natural rubber and synthetic rubber is expected to further expand.

Traditionally, about 70% of the demand for natural rubber is concentrated in the tire production sector, especially for all-steel tires, which have higher requirements for the balance of natural rubber properties. The raw material sources and cost structures of natural rubber and synthetic rubber are significantly different: the former comes from rubber tree planting, with a high proportion of labor costs; the latter relies on the petrochemical industry chain, and its price fluctuations are not only affected by the crude oil market, but also closely related to the utilization rate of synthetic rubber equipment.

The two have significant differences at both the supply and demand ends. According to the International Rubber Study Group (IRSG), the global synthetic rubber's share of total rubber consumption has remained stable at around 53% from 2020 to 2024, except for 2022 when it dropped to 51%. This data confirms that there is still a significant difficulty in the complete replacement of natural rubber by synthetic rubber.

From the perspective of substitutes, the two only have partial substitutability: in the tire sector, there is a large room for substitution adjustment between natural rubber and synthetic rubber if the price difference is large. With the iterative upgrading of production technology, this substitutability is expected to be further enhanced, and in the non-tire sector with relatively relaxed performance requirements, the substitution ratio may be higher.

The scale of China's synthetic rubber industry continues to expand, and the proportion of its output in the global natural rubber production has rapidly increased: it has exceeded 60% according to the National Bureau of Statistics and about 30% according to the IRSG statistical standard. Despite the differences in statistical standards, they all reflect the rapid growth of China's synthetic rubber production capacity and output, and the increasing global market share.

Current crude oil prices are weak, and the expansion of domestic synthetic rubber production capacity has added to the pressure on synthetic rubber prices, with the price difference between natural rubber and synthetic rubber rising to a ten-year high. However, it is worth noting that the gross profit margin of butadiene rubber has not fallen to a ten-year low in tandem, and its price ratio to crude oil is around the 15th percentile since 2009, indicating that there is still room for decline in extreme cases. If crude oil prices continue to fall or the gross profit margin of butadiene rubber continues to decline, the price difference between natural rubber and synthetic rubber is expected to further expand.

With the gradual disclosure of production and import and export data, the market's expectation of a reduction in natural rubber production in 2024 has been falsified. Since this year, hidden inventories have continued to flow into the Chinese market in large quantities, and the data further confirms the loose supply pattern: in the first 10 months of 2025, the cumulative import volume of natural rubber and synthetic rubber (including latex) in China increased by 15% year-on-year.

The latest forecast data from the Asia Natural Rubber Producers’ Organization (ANRPC) shows that the global natural rubber cumulative production is expected to increase by 2.3% in the first three quarters of 2025, while the consumption is expected to decrease by 1.5%; domestically, the natural rubber production has increased by more than 7% year-on-year in the first nine months of 2025, and the data from both supply and demand sides indicate that the current market supply is relatively sufficient.

The phenological conditions in the main production areas of natural rubber this year are better than last year, and no destructive disasters such as strong typhoons and floods have occurred. The premium of latex to cup latex is at a five-year low, which is consistent with the current lack of obvious pressure on the supply side. The raw material cup latex price in Thailand has moved away from the high-vibration interval from March last year to March this year, and although it has slowly recovered since June, the current profit level of processors is still poor. From the perspective of price percentiles, natural rubber has a stronger support on the cost side than synthetic rubber. In addition, the natural rubber market is facing a long-term capacity cycle inflection point on the supply side, while crude oil prices are long-term constrained by the dual pressure of supply-side production increase and demand-side new energy substitution.

From the demand side, the domestic real estate market, which is highly correlated with the demand for rubber replacement, remains weak, and the data on new housing starts directly dragged the performance of the full steel tire replacement demand. In terms of new car matching and exports, since this year, the effect of rush exports and policy stimulation in the car market have already led to demand overextraction; on the margin, the growth rate of heavy truck sales in October slowed down compared to September, and the expected deceleration in passenger car sales is more significant. Data shows that heavy truck sales in October increased by about 40% year-on-year and decreased by about 12% month-on-month; from January to October 2025, the cumulative sales of heavy trucks increased by about 22% year-on-year.

Overall, the weak performance of the real estate market remains a key factor of suppression, combined with the previous over-consumption of export and new car matching demand, the drag on rubber prices from the demand side will continue without strong policy support. In the later stage, we need to focus on the production release during the peak season of supply, the change in explicit inventory and the trend of heavy truck sales.

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