In January 2025, the global Natural Rubber (TSR) market experienced a downturn as supply availability improved, driven by better weather conditions in key production regions. Additionally, demand from China, the largest importing nation, declined ahead of the Spring Festival holiday. With downstream businesses reducing activity during this period, market transactions slowed, leading to a gradual decrease in Natural Rubber inventory and contributing to the overall sluggish market performance.

In the Southeast Asian region, the Natural Rubber market experienced a decline of 2%, at the start of 2025. This bearish market sentiment of Natural Rubber can be associated with the availability of sufficient supply for the demand from the domestic as well as the overseas downstream automotive and tire sectors. Furthermore, the demand for Natural Rubber from the major importing nation-China- fell during January 2025 as the Natural Rubber inventory continues to show a state of accumulation. As of January 12, 2025, the total inventory of Tianjiao bonded and general trade in the Qingdao area was 504,300 tons, an increase of 4,200 tons compared to the previous period. As of January 16th, the operating load of semi-steel tires in domestic tire companies has slightly decreased by around 78%. The construction of all steel tires by tire companies in Shandong Province has slightly decreased by about 60%.

Additionally, in European nations, the announcement on October 1, 2024, of a 12-month delay in the EUDR aimed to give companies more time and clarity to adjust while supporting the regulation’s long-term goal of combating deforestation. This postponement has relieved short-term concerns for rubber exporters who had worried about losing access to the significant EU market. With this immediate pressure reduced, the urgency to secure Natural Rubber supplies that meet the new standards has lessened, causing market concerns to ease and prices to decline. Consequently, this has added to the bearish trend in Natural Rubber prices.

Apart from the postponed implementation of the EUDR, several other factors have contributed to the recent drop in Natural Rubber prices. A key development is the beginning of Donald Trump’s second term as U.S. president, which has intensified concerns over renewed trade conflicts, particularly the potential for higher tariffs on imports from China, the world’s largest importer of Natural Rubber. If these tariffs are enforced, they could discourage Chinese buyers from purchasing rubber products, weakening global demand and putting downward pressure on prices. Additionally, the overall decline in oil prices during the fourth quarter has further suppressed Natural Rubber prices. Since many synthetic rubber products are made from crude oil and refined petroleum, cheaper oil has made synthetic alternatives more cost-effective, reducing demand for Natural Rubber. These combined economic and geopolitical influences have strengthened the bearish trend in the Natural Rubber market.

The global Natural Rubber market had expected prices to rise following the ANRPC’s warning of possible shortages lasting until 2028, with an estimated annual shortfall of 600,000 to 800,000 tonnes. A supply deficit like this would generally push prices upward. However, recent reports suggest that rubber production in Thailand and Vietnam is recovering due to favorable weather conditions in early 2025. If this positive trend in production persists, the Natural Rubber market may stabilize or even see a decrease in prices.