Tire Makers Cautious, Demand Limited
Natural rubber is the lifeblood of tire manufacturing. Any fluctuation in its price directly impacts tire manufacturers' costs, and the production and sales rhythm of the automotive parts supply chain also depends on it. Looking at the latest market data from July 13th, the global natural rubber market is generally characterized by a slightly stronger but volatile international market, while domestic spot prices have followed suit with a slight increase.
Several factors, including Southeast Asian rainy season weather, changes in domestic port inventories, and the seasonal shift in the tire industry, have combined to create a slight divergence between domestic and international rubber prices. However, there has been no significant one-sided surge or plunge; the overall market remains in a range-bound tug-of-war, with a strong sense of struggle between bulls and bears.
From an international market perspective, raw material prices in Southeast Asia's main producing regions have recently rebounded steadily, providing a floor for global rubber prices. Thailand, as the world's largest rubber producer, has seen a continued recovery in raw material purchase prices.
As of July 10th, field latex was quoted at 79.3 baht/kg, up 4.3 baht/kg from the previous period, and cup lump was quoted at 67.5 baht/kg, up 2 baht/kg. Excessive rainfall in rubber-producing areas during this period has hampered outdoor rubber tapping, reducing production efficiency and tightening spot market supply, directly driving a rebound in raw material prices.
Futures markets have followed suit, with the Singapore Exchange's TSR20 main contract firmly above 216 cents/kg. Following the rise in international crude oil prices, synthetic rubber production costs have increased, leading to higher prices. Downstream buyers have shown increased willingness to purchase natural rubber, which offers better value for money.
Coupled with the reduction of short positions in futures, international rubber prices have rebounded from a two-month low. However, it should be noted that Southeast Asian producing areas are gradually entering a recovery period, and the supply of new rubber will steadily increase. Furthermore, the global tire industry is in its traditional off-season, resulting in insufficient market demand and limited upward momentum for rubber prices. A sustained upward trend is unlikely in the short term.
The domestic natural rubber market is generally stable with a slight upward trend. Futures and spot prices are closely aligned with industry realities, with relatively mild fluctuations. In the spot market, as of July 9th, prices in Yunnan and Hainan, the two major producing areas, remained stable. The reference price for Yunnan latex was 16,000 yuan/ton, and the reference price for Hainan fresh latex was 16,700 yuan/ton.
Recent stable weather in domestic rubber-producing areas has ensured normal rubber tapping and production, resulting in ample raw material supply and no significant supply-demand gap. In the distribution sector, the spot price of state-owned full-latex rubber is 17,100 yuan/ton, an increase of 400 yuan/ton in a week.
The core reason for the price increase is the continued decline in domestic port inventories and the gradual improvement in the spot market circulation. In the futures market, the Shanghai rubber futures main contract rose 0.9% weekly, and the TSR20 rubber futures main contract rose 1.8% weekly.
The market followed the international market's upward trend, but the increase was less than that of the international market. The price difference between domestic and international markets remained within a reasonable range, and the overall market operation was stable.
From the perspective of inventory and spot circulation, the domestic natural rubber supply-demand pattern is continuing to recover. As of July 5th, the total natural rubber inventory at Qingdao Port was 675,200 tons, a decrease of 15,900 tons from the previous period. Bonded and general trade inventories declined simultaneously.
With rubber prices at a relatively low level in the previous period, most tire companies seized the opportunity to replenish their stocks as needed, resulting in a significant increase in deliveries and effectively digesting the previously accumulated inventory.
Meanwhile, the number of natural rubber warehouse receipts on the Shanghai Futures Exchange continued to decline slightly, and the available spot resources in the market gradually tightened. This trend provided solid support for domestic rubber prices, offsetting the negative impact of the off-season demand in the tire industry, and the basic situation has stabilized.
Downstream tire demand is currently the key factor limiting significant fluctuations in rubber prices. July is traditionally a slow season for the tire market, and with many domestic tire companies recently carrying out equipment maintenance and reducing production line operating rates, as of July 9, the overall capacity utilization rate of both all-steel and semi-steel tire companies has slightly declined. Terminal factories are adopting a cautious purchasing mentality, mainly purchasing on demand and replenishing inventory in small quantities, resulting in low overall market trading activity. However, positive factors are slowly accumulating.
Currently, most tire factories' maintenance is nearing completion, and the operating rate of production lines is expected to gradually recover. At the same time, the domestic heavy truck market continues to see year-on-year sales growth, and end-user demand is steadily recovering, laying the groundwork for a rebound in rubber prices later. Furthermore, as crude oil prices rise, the price advantage of synthetic rubber as a substitute for natural rubber gradually diminishes, which in turn boosts interest in purchasing natural rubber.
Overall, the domestic natural rubber market on July 13th exhibited a clear characteristic of range-bound trading, supported by costs and constrained by demand. International prices maintained a relatively strong trend due to weather disturbances in Southeast Asia and rising raw material costs; domestic prices saw a slight increase thanks to port inventory reduction, but weak end-user demand during the off-season limited further upside.
In the short term, both domestic and international rubber prices are likely to continue their oscillating pattern. Several key factors need to be closely monitored: weather changes in Southeast Asian producing regions, the progress of new rubber supply recovery, the strength of the recovery in domestic tire manufacturing operations, and fluctuations in overall market sentiment. Any subtle changes in the supply and demand fundamentals will directly guide the direction of rubber prices in the next stage.
