Omicron fogs short-term outlook for NR

KUALA LUMPUR—The short-term outlook for natural rubber markets remains unclear as demand could be impacted by a number of factors including the new Omicron COVID-19 variant, according to Association of Natural Rubber Producing Countries.

In its latest rubber market analysis published Dec. 12, the ANRPC said rubber prices were expected gain from the impending seasonal short supply and improving demand from China.

The positive effect of the favorable supply-demand fundamental, however, could be offset by the potential strengthening of the dollar, higher restrictions due to Omicron, lack of momentum in the crude oil market and the continuing chip shortage in the automotive sector.

According to ANRPC, the global supply of NR is expected to decline from December 2021 onwards due to annual wintering of rubber trees in major producing countries.

Furthermore, China is anticipated to import higher volumes during December and January, ahead of the week-long Chinese New Year holiday starting Feb. 1, 2022.

Chinese manufacturing companies, said the ANRPC, are expected to build up NR inventory, and the country is anticipated to consume around 500,000 metric tons during each month of December and January.

The market will also be supported by a slight anticipated deficit of around 200,000 tons by the end of the year, according to ANRPC.

While the supply-demand fundamental remains favorable, the association warned that the U.S. dollar is likely to firm up if the Federal Reserve hikes interests.

"A stronger dollar often makes speculative investments in commodities less attractive, and natural rubber is no exception," it added.

Furthermore, the new restrictions imposed across Europe against the spread of the Omicron strain of Covid will likely have negative bearing on rubber futures.