Natural Latex Price Rise Analysis and Trend Forecast
Introduction: The natural latex price went up recently. The price spread between the price of concentrated latex of 60% dry rubber (after being converted to the price of concentrated latex of 100% dry rubber) and dry rubber hit a record high.
Historically high price spread between dry rubber and natural latex
Taking Chinese-made latex as an example, Chinese-made concentrated latex price remained at more than RMB 13,000/mt as of May 23, and after rough calculation, the price of concentrated latex of 60% dry rubber (after being converted to the price of concentrated latex of 100% dry rubber) was more than RMB 19,000/mt. Compared with the SCRWF price, the price spread continuously widened since 2022, and as of May 23, the price of concentrated latex of 60% dry rubber (after being converted to the price of concentrated latex of 100% dry rubber) was over RMB 7,500/mt higher than the SCRWF price, hitting a record high.
The natural latex market performed better than the dry rubber market owing to the short supply.
Y-O-Y decrease in natural latex import volume and delayed output release
China’s natural latex supply mainly comes from imports and Chinese-made latex, and natural latex imports take a relatively high proportion. According to GACC, in the first quarter of 2022, China’s natural latex import volume totaled 123.8kt, down 17.4% Y-O-Y. In terms of Chinese-made latex output, as an agricultural product, natural rubber has a certain seasonality in its output and supply. Generally speaking, China’s production areas start trial tapping work in the second half of March and gradually conducted tapping work in April and May. The tapping work in Yunnan was about half a month earlier than that in Hainan. The production of natural latex is mainly concentrated in Hainan. However, in 2022, the Hainan production area delayed tapping work due to the low temperature and unsynchronized fallen leaves of rubber trees. As of May 23, the overall tapping in the Hainan production area was limited, and field latex output was few. It was learned that most plants failed to undergo normal production due to scarce feedstock, and this caused a further tight supply of natural latex.
In the context that natural latex import volume and output showed a Y-O-Y decrease, the spot supply was tight. In terms of demand, end orders underperformed, but enterprises stocked up on a need-to basis to sustain stable production. Thus, supported by tight supply and rigid demand, the spot prices of natural latex kept rising. In particular, Chinese-made concentrated latex prices surged, and the price of concentrated latex of 60% dry rubber (after being converted to the price of concentrated latex of 100% dry rubber) was greatly higher than the old SCRWF price.
Natural latex market outlook: As the natural latex price is high, China’s plants hold production profits of RMB 1,000-2,000/mt. Consequently, natural latex plants actively snap up field latex to produce concentrated latex. The production enthusiasm of concentrated latex is higher than that of dry rubber. Currently, the field latex supply is insufficient, so the concentrated latex output has not notably increased. Once the supply of field latex becomes stable, the concentrated latex output will quickly increase. However, SCI learns that more latex downstream plants suspend production, as their orders underperform. Therefore, in the context that the supply is predicted to gradually increase, the soft demand is predicted to drive high natural latex prices down.
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