Natural Rubber Market Major Drivers Analysis
The year 2022 is about to come to an end. At this stage, the main factors that players pay attention to in the market are as follows: 1. The impact of macro positive drivers on demand recovery 2. The situation of downstream factories during the Spring Festival holiday this year 3. The situation of downstream factories' stock preparation before the festival. Next, this paper will make a brief analysis of these market elements.
The favorable macro environment drives the price of natural rubber up
Since the beginning of December, the macro environment has been favorable, which is expected to drive commodity prices up. Taking SCRWF in Shanghai as an example, the average price at the beginning of December was RMB 12,290/mt, up RMB 454.77/mt or 3.84% from the average price in November.
Downstream demand is sluggish, and some plants may take holidays in advance.
Although the price of natural rubber has risen, the supply and demand fundamentals have not improved significantly. At present, the Yunnan production area stops cutting comprehensively, and the processing plant mainly produces rubber blocks. There are rainy days in Hainan production area from time to time, which affects the output of raw materials. The enthusiasm of processing plants to snap up raw materials is reduced, and the price of raw materials is under pressure.
At the same time, the demand is not expected to be better. According to SCI, the operating rate at all-steel tire producers in Shandong has declined W-O-W. It is known from the market that in the low demand season of the downstream tire industry, the sales of natural rubber are average. After the replenishment in November, the tire factory will purchase on a need-to basis. It is said that in recent days, the willingness of some tire factories to stock up has increased, because they are worried about the uncertain factors such as weather and macro environment affecting raw material prices. On the whole, it is very difficult to cause demand recovery in a short period of time.
SCI has also carried out relevant research on the issue of production suspension during holidays, which is concerned by everyone in the market. It is understood that the tire factory has no holiday plan at present. In contrast, the downstream product factories, taking the shoe material factories as an example, are affected by poor demand, lack of orders and macro uncertainties. It is said that since the end of November, some small shoe material processing factories in Guangdong have successively closed down for holidays. Some manufacturers in Fujian have been on holiday since the middle of November. The specific holiday time and start-up time are still under monitoring.
As far as the pre-holiday downstream replenishment is concerned, the main reasons why shoe manufacturers are not willing to stock up are as follows: First of all, we heard from the market that leading shoe manufacturers may have a production reduction plan next year, which may last until the winter of 2023. As a result, some manufacturers are bearish about the market in the first quarter of 2023. Downstream factories are more cautious and do not dare to stock up easily. Secondly, since the fourth quarter of 2022, the number of orders from many manufacturers is relatively small, and the consumption of NR inventory is relatively slow. At this stage, most factories maintain rigid purchase.
To sum up, in the short term, the market will be affected by macro factors, which will drive the price of natural rubber to rise. However, this positive drive can’t boost the demand side in a short time. Downstream demand is still sluggish, which is still an important driver affecting the natural rubber price. Early holidays of downstream factories are also a chain reaction caused by poor performance of the demand side. In the long run, the natural rubber price will still be dominated by supply and demand fundamentals.
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