Good Weather Forecasts in Yunnan and Hainan, Rubber Prices Decline

Rubber prices at the Tokyo and Shanghai exchanges simultaneously slumped in trading today, Wednesday (05/22/2019), due to pressured estimates of the end of production disruptions in China.

Based on Bloomberg data, rubber prices for the most active contract in October 2019 at the Tokyo Commodity Exchange (Tocom) ended down 1.44 percent or 2.80 points at 191.50 yen per kg from the previous closing level of the trade.

In trading on Tuesday (5/21/2019), the October contract rubber price was able to climb 3.80 points or 1.99 percent and closed at 194.30 yen per kg.

In line with rubber prices in Tokyo, rubber prices for the most active contract in September 2019 on the Shanghai Futures Exchange closed down 125 points or 1.02 percent at 12,100 yuan per ton on Wednesday (5/22).

Reported by Bloomberg, rubber prices in Shanghai posted the biggest decline since October due to expectations that production disruptions in China would end with rain forecasts in Yunnan province, the largest rubber producing region in China.

According to China’s National Meteorological Center, moderate to severe rainfall is predicted to flow through plantations in the province, which have been experiencing heat waves and droughts.

In fact, in the trade on Tuesday (21/5), both rubber prices in Tokyo and Shanghai were able to strengthen, driven by ongoing supply disruptions in China due to hot weather in a number of production areas.

The hot heat in southwest China forced the country’s plantation owners to stop wiretapping activities last week.

To note, according to data from the Association of Natural Rubber Producing Countries, China is a significant natural rubber producer with production reaching around 800,000 tons in 2016.

Also weighing on the rubber sentiment, West Texas Intermediate (WTI) crude oil prices for July 2019 shipments were observed to continue to weaken 0.97 percent or 0.61 points to the level of US $ 62.52 per barrel at 3:19 p.m. WIB. The Brent oil price for the July 2019 contract fell 0.50 points or 0.69 percent to 71.68.

The American Petroleum Institute (API) reportedly reported an increase in the number of US crude oil stocks by 2.4 million barrels last week.

API also reported an increase in the amount of gasoline supply by 350,000 barrels last week, while the number of stocks at Cushing, Oklahoma increased by 871,000 barrels.

As is known, synthetic rubber which is the main substitution material for natural rubber is made from oil-derived polymers, so the price movement is clearly influenced by the price of oil which is the original raw material.