Global Natural Rubber Faces Bearish Trends in the face of adequate stocks and slow market offtakes

Hamburg, Germany: In the global market, the prices of Natural Rubber witnessed a slight decrease in the first month of 2024. At the start of 2024, the cost of Natural Rubber exhibited a decline from its previous high, creating favorable conditions for downstream industries to capitalize on purchasing during downturns. Nevertheless, the prime season for fresh rubber in Thailand's primary production zones lacks significant strength. Despite the favorable situation for the downstream sectors, the purchasing activities were low in January 2024 due to the accumulated inventory levels which were sufficient to fulfill the tepid demand from the downstream Tyres and Automotive industries. Therefore, the production of Natural Rubber was executed at a slower pace to avoid further accumulation of the inventories and so the existing ones could be utilized first.

In the German market, the prices of Natural Rubber TSR-20 experienced a slight decline of 0.61% and reached USD 1620/MT (CFR-Hamburg). Therefore, the trade inflows for Natural Rubber from the Malaysian and Indonesian markets slowed down to avoid the further piling of the inventory levels to dodge any further losses. However, as per the recently implemented European Union Deforestation Regulation (EUDR) mandates that seven key commodity products—soy, palm oil, wood, cocoa, coffee, and rubber, all recognized as significant contributors to deforestation—will be prohibited from sale in the European countries if they originate from regions impacted by deforestation or practices leading to forest degradation.

At the cost of their marginal profits, the market players tried to persuade the buyers to enhance their purchasing activities. However, the buyers were cautious about their purchasing activities and avoided bulk procurement due to the sufficient availability of Natural Rubber in the market.

Similarly, in Southeast Asia, the market for Indonesian Natural Rubber (TSR) SIR-20 (FOB-Jakarta) experienced a slight decrease in its price trend. Adequate supply among stored inventory levels in facilities was able to meet the rising demand from downstream industries such as Tire and Automotive manufacturing. Additionally, Indonesian rubber producers are concerned about the potential impact of the European Union's Deforestation Regulation (EUDR), fearing it could worsen the challenges already faced by the struggling industry by hindering exports to EU nations and other markets.

After maintaining the consistent increase in the prices of Natural Rubber TSR 20 in (CFR-Texas) the US market from the past few months, the prices of the Natural Rubber showcased a slight decline of 0.57% in its trend in Jan 2024. Due to the slow consumption rate of Natural Rubber from the storage units, the market witnessed a slight bearishness in its trend due to the accumulation of the existing inventories and sluggish demand from the downstream Tyres and Automotive industries. Consequently, trading activities from the Southeast Asian market to the US market were executed at a slower pace due to the lower demand.

As per the analysis of ChemAnalyst, in the upcoming weeks, the market expects a gradual easing of the supply and demand imbalance for Natural Rubber. The overall price trajectory is anticipated to show an upward trend which will further provide boost to the trading fundamentals along with the higher market deals. This trend might be driven due to the reduction in production from major rubber-producing countries including Malaysia, Indonesia, coupled with limited inventories during the winter season, which may create pressure on the Rubber prices.