17-19, June 2020, HO CHI MINH CITY

Positive signs of the rubber market in April/2019

Rubber market in April: the world rubber price recovered

The rubber market has shown many positive in April 2019 thanks to a change in the balance of supply - demand and political factors.

Rubber prices in the world recovered

After a sharp decline last month, the price of rubber in Japan, China and Thailand tended to recover from the beginning of April. In Japan, the May delivery price on TOCOM commodity trading floor is currently 186.6 yen / kg (US $ 1.67 / kg), up 8% from the end of last month.

In China, the price of natural rubber for May delivery closed 17/4 session at 11.410 yen / ton (equivalent to about 1.7 USD / kg), up 0.1%. Similarly, RSS3 rubber price in Thailand also increased by 1.8% compared to the end of March and closing on April 17 was offered at 54.07 baht / kg (equivalent to 1.7 USD / kg).

For the domestic rubber market, the price of raw rubber latex in Binh Phuoc, Tay Ninh and Dak Lak increased slightly in the first 10 days of April. Specifically, on April 10, the purchase price of rubber in the garden and at the factory in Dak Lak increased by VND 7 / TSC compared to the end of last month, reaching VND 240 / TSC and VND 245 / TSC respectively. In addition, Vietnam's rubber export price in April averaged USD 1.420 / ton, up from USD 1.395 / ton in the previous month.

According to the statistics of the General Department of Customs, the volume of rubber exports as of the first half of April reached nearly 379.000 tons, up 28.7% over the same period last year. Export value also increased by 16.2% and reached over 504 million USD.

Pushing force for the rubber market

Rubber prices increased due to a decrease in rubber supply when Indonesia, Malaysia and Thailand, the three largest rubber producing countries in the world, started implementing export restrictions. Under the approved plan, Indonesia will reduce 98.160 tons of rubber exports in 4 months starting April 1. Similarly, Malaysia and Thailand will in turn reduce 15.600 tons and 126.240 tons from May 20, Jakarta Post said.

The move is part of a plan to reduce exports of 240.000 tons of rubber from the three largest rubber producing countries in Asia, said Kasan Muhri, head of Indonesia's trade development and rating agency.

Kasan said Indonesia, Malaysia and Thailand's export restriction plans could help the price rise to more than $ 1.5 / kg, even reaching $ 2 / kg. Global rubber prices are now around 1.4 USD / kg, up from below 1.2 USD / kg at the end of last year.

Rising world oil prices are another support factor. Brent oil price is hovering near the peak of 2019 and closing on April 17 is USD 71.62 / barrel, up 4.7% compared to the end of March. Crude oil price kept its upward trend since the end of February due to concerns related to supply shortages in Iran, Venezuela and Libya in the context of the Organization of Petroleum Exporting Countries limited production.

The market also keeps optimistic sentiment about economic growth in China, the world's largest rubber consumer. According to the latest data, China's economy grew 6.4% in the first 3 months of this year, on par with the growth of the fourth quarter of 2018 and higher than the market's forecast.

Recent figures from both private and government sources show that China's economy has improved in March. In March, industrial output increased by 8.5%, the fastest increase in the last 4 years. Retail sales increased by 8.7%, exceeding expectations of analysts, while asset investment also increased by 6.3% in the same period.

This result is partly due to Beijing's stimulus policy, such as reducing the bank's compulsory reserve ratio to encourage financial support for small and medium enterprises.

Along with the improvement of China's economy, progress in trade negotiations between the US and China also eased fears that demand for rubber will weaken. US Treasury Secretary Steven Mnuchin on April 13 confirmed that trade negotiations with China are about to be completed. Some sources also believe that the two sides are promoting direct meetings to reach an agreement in early May and the signing ceremony may take place at the end of the month.

The Association of Natural Rubber Producers estimates that basic factors are moving in favor of natural rubber prices both in the spot and future markets.

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