What pushes natural rubber price exceeding 20,000 yuan/ton?

Statistics show that the price of natural rubber surged in 2016 from 9,760 yuan/ton to 16,380 yuan/ton by the end of the year, up 67.83%.

In Dec. 2016, natural rubber price topped 20,000 yuan/ton again three years later and increased further as since the beginning of 2017.

Figures from Tokyo Commodity Exchange showed that natural rubber price surged 26% in January and hit a five-year high, and the growth rate was the highest since 1990.

Natural disaster leads to supply-demand imbalance

As the world’s largest rubber producer, major producing areas in Thailand were hit by flood last Dec. and rubber parks suspended rubber tapping in advance for one or two months.

Concerns over less rubber production by Thailand further boosted the price.

Thailand authority estimates that in the 2016-2017 crop year, Thailand’s natural rubber output may drop 10%. In 2017, it may lessen 7.6% at least.

Speculation

Over the past few years, speculators put their eyes on rubber.

A futures analyst said those speculators entered the market with deep pockets and pushed up rubber price up by more than one fold and the growth rate of rubber price hiking hit a 25-year high, signifying the capacity of these speculators in affecting the market.

The analyst said the speculators believed China’s economic recovery will stimulate the development of auto industry and Trump’s economic stimulus policy will resume U.S. development. Rubber demand is to surge as a result.

Vigorous downstream demand

Statistics show that China’s auto output rose 14.5% year on year in 2016, and the sales were up 13.7%. China Association of Automobile Manufacturers predicts that China’s auto industry will keep growing in the coming 5-10 years.

Brilliant performance of China’s auto output and sales boosted the demand for tires.

Tire industry consumes about 70% of total rubber output.

Rising rubber price forces tire manufacturers lifting their prices higher and higher.

An industry insider said as the season of leaf-fall approaches, combined with the steady demand from China’s tire market, natural rubber price will maintain high in the coming months.