KUALA LUMPUR—A downtrend in natural rubber prices has been reversed in recent days, helped by a worldwide reduction in COVID-19 cases, progress in the U.S.-China ties and the softening of U.S. dollar.
The first half of September saw wide swings as both physical and futures markets started the month with muted sentiment.
A combination of increasing global COVID cases, retail sales slowdown in China, UK's trade deficit and the automotive decline sent markets down between Sept. 6-9, the Association of Natural Rubber Producing Countries (ANRPC) said in its latest market analysis.
The downtrend, however, did not persist beyond Sept. 9, ANRPC said.
"The period starting from Sept. 10 through mid-September has seen the prices strongly recovering both in the physical and futures markets," it said.
The increase, ANRPC said, was due to a number of factors, including media reports of a reduction in global COVID cases.
A softening of U.S. dollar around Sept. 9, and the news of a 90-minute exchange between the U.S. and Chinese presidents, led to gains across global equities.
The EU's economic outlook played a factor, with the Eurozone expecting 5 percent economic growth.
Also contributing were a return from summer holidays and an increase in traffic and public transport usage in the West.
The first two weeks of September unfolded the "dominant influence of external factors" on the NR prices, ANRPC said.
"The pace of global economic recovery, developments in the auto sector, and crude oil trends are important factors from this perspective," it added.
As for the short-term outlook, ANRPC said global markets are expected to be set by several key factors, including potential demand from Chinese companies which will aim to build up inventories ahead of the off-season of supply.
Other factors that could impact the markets: perceptions of speculative investors on the timing of tapering (gradual reduction in massive stimulus) by the U.S. Federal Reserve; strength of the dollar; developments in the crude oil market; and potential changes in the spread of COVID-19.
While the month of October is expected to a see a rise in supply, the anticipated large volumes of imports from China could wipe out the increase in production, the report concluded.