Natural Rubber Market Is Expected To Get A Boost

The natural rubber market depends on a lot of factors including those which are not directly related to this sector. Read more about how the rubber market is expected to get a boost.

Rubber-Market-Expected-To-Get-A-Boost

The covid-19 pandemic came hard on every sector, including the natural rubber market. And the delta variant has further clouded the sentiments. However, things in the past few months have created a positive atmosphere across the economic sectors, influencing the demand-supply. The latest projection has come from the Rubber Market Intelligence Report from the Association of Natural Rubber Producing Countries (ANRPC).

 

What makes the NR market positive?

The prices of natural rubber are being driven by improved demand in India, China, Europe and the US. China and India represent 43 per cent and 8 per cent of the world’s total natural tyre consumption, respectively. And as manufacturing activities are gradually restoring in these countries, there has been a huge demand for raw materials. 

 

Another significant reason for the positive momentum in this sector is the announcement of the US Federal Chair not to reduce the stimulus measures, which is an optimistic sign for commodities, including the natural rubber.

 

However, the report further says that the high-risk activities currently going on in the rubber future market, especially in the Shanghai Futures Exchange, can remain obstructed as there are concerns that China will tighten its regulatory grip on various technological companies and pose a challenge to global recovery which is being disrupted by logistics and deficiency of semiconductor chips. 

 

While the atmosphere in the physical market may be favourable, less excitement in the speculative activities in the futures market can be disheartening for the natural rubber prices in the short term.

 

What about the physical prices of TSR?

On the other hand, a relatively favourable demand-supply has supported the physical prices of TSR (SMR 20 and STR 20) which is considered the most accepted form of natural rubber and predominantly used in the manufacturing of automotive tyres, constitutes around 70 per cent of the total global output. 

 

Surprisingly, it’s a deviation from the regular pattern, which has given a boost to physical markets of TSR, which has outperformed the rubber futures, backed up by an improved outlook.

 

What’s affecting the natural rubber prices?

The report further states that the natural rubber prices have been affected by many other factors, even those which are not directly related to the rubber sector. The prices of the dollar will likely set the next course of action in the sector. 

According to Motilal Oswal Financial Services, while OEM demand can experience a cyclical recovery in the next two to three years, the demand in the aftermarket is expected to gain from repressed demand, restrictions on the import, and premiumization in the automotive segments witnessed in the last five years.

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