KUALA LUMPUR—Natural rubber prices tumbled in the second half of August in both futures and physical markets across southeast Asia, in sharp contrast with the short-term outlook presented by the Association of Natural Rubber Producing Countries earlier that month.
In its latest market intelligence update on Sept. 3, ANRPC said regions such as the U.S., United Kingdom and Europe witnessed a setback in economic recovery due to the outbreak of the COVID-19 delta variant, and were compelled to scale down operations during the two weeks to end of August.
"The delta variant has muted the recovery momentum in the U.S., U.K., euro area and China, having implications on the demand outlook for NR," the ANRPC market intelligence report said.
Recovery momentum was also capped by the cutdowns in car production due to the continued severe shortage of chip semiconductors globally.
In terms of short-term outlook, the ANRPC report said the conditions now prevailing in the physical markets are expected to remain unchanged until China begins its anticipated large-scale imports.
In China, said ANRPC, media reports suggest that the NR inventory is "depleting" as manufacturers opted to source their rubber locally to avoid high shipping costs.
"The total inventory has reportedly dropped by 190,000 (metric tons) between the beginning of June and end of August," the report said.
As Chinese manufacturers and traders try to replenish the inventory ahead of the offseason, physical markets in Southeast Asia can expect imminent large-scale imports from China "either in September or in October."
Citing "official sources," ANRPC said that China is expected to import at least 4.9 million tons of NR in 2021, and by the end of August it was estimated to have imported 3.2 million tons.
"The remaining 1.7 million tons has to be imported to bridge the shortfall anticipated during the four months from September to December 2021," the report said.
Furthermore, the country is expected to import another 2 million tons of NR to cover demand over the four months from January to April next year, when tapping completely stops due to off-season.
On the supply side, the report said that physical markets were unlikely to receive any strong support in the short-term as the COVID-19 outbreak in southeast Asian countries has had little impact on production.
To conclude, ANRPC said, the course of prices in the short-term will be largely determined by the timing of China's imminent large-scale import.