Higher rubber prices here to stay, says Commerzbank

03.03.2017

Rubber futures, while down more than 12% in Singapore from a three-year high reached a month ago, are poised to remain above 200 cents per kilogramme – with the potential for price upsurges, Commerzbank said.

The bank acknowledged the pressure on prices from the prospect of a resumption in rubber tapping in Thailand, the top producer and exporter, after disruptions since last autumn from heavy rains.

"The still-high Chinese rubber stocks also have a dampening effect on rubber price development," Commerzbank said, with the country stockpiling the tyre ingredient for its huge car industry.

Indeed, vehicle sales in China, where automotive production topped 3m vehicles in November for the first time, will expand by a further 5% this year, according to the country's main car industry association.

Rubber stocks

However, this China forecast increase represents a "positive outlook for rubber demand" at a time when supplies in many other countries are proving less robust

Indeed, stocks for delivery against Tokyo-traded rubber fell to 1,489 tonnes as of February 20, the lowest since August 2010 and down 79% year on year.

And long-term prospects for a return in natural rubber to a world production surplus look poor, with the Rubber Economist seeing deficits both this year and next, after an output shortfall estimated at 151,000 tonnes last year.

The Association of Natural Rubber Producing Countries (ANRPC), whose members account for some 96% of global production, forecasts a shortfall this year of 350,000 tonnes.

'Additional lift to prices'

"A good year ago, natural rubber in Singapore was trading at only just over 100 US cents per kilogramme – its lowest level since September 2003 – following years of market surpluses," Commerzbank said.

However, assuming the market indeed sees the deficits Rubber Economist and ANRPC forecast, "prices above 200 cents per kilogramme are here to stay for quite some time".

Given tappers in major South East Asian producing countries are approaching the so-called "wintering" period of low output, "this should additionally give the price an additional lift at least temporarily," the bank said.

'Quite a bit tighter'

The forecast broadly tallies with one last month from plantations group Sipef, which underlined the boost to prices into the early weeks of this year "as the floods in Thailand and Vietnam only worsened.

"The supply and demand picture has become quite a bit tighter due to production hiccups," Sipef said.

"It is expected that we will keep steady prices in the coming months."


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