Buyers take a step back, uncertain of outlook; spot steady 

The spot prices steadied during the Asian trade day as some of the major tire makers took a step back to assess the market amid a public holiday in Thailand and the US dollar losing strength against the Asian currencies. However, market participants were skeptical of the sustainability of the rally in the market. 

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1325/mt FOB Belawan/Surabaya, Standard Thailand Rubber (STR) 20 at US$1365/mt FOB Bangkok/Laem Chabang, and African Rubber (AFR) 10 at US$1350/mt CIF Rotterdam/Hamburg, all unchanged from December 02, 2022.

Some market participants hugged the sidelines during the day, trying to assess the market direction. While the forward months still look bearish, the spot market has been firm on account of positive cues from China and the return of Chinese buying. 

With Thailand soon hitting its peak production period, there is much anticipation among the market participants. “I think a lot of producers are short, and they expect some sort of drop when peak period hits,” said a trader source. 

However, the relaxation of some of the pandemic restrictions in China has brightened the outlook for global growth and commodity demand. In addition, the weakness in the US dollar down against the Asian currencies has further supported the market.

This, however, would impact the producers, who might find it challenging to book profit as they usually cash upon the dollar difference. There was buying interest for SIR 20 at US$1320/mt FOB Belawan/Surabaya, with no counter offers.

While the western markets are still struggling with economic setbacks and inflationary pressure, China is the only active buyer in the market. As a result, all the eyes are on China now. “All the US and EU tire majors stopped buying and have to wait till next year. So right now, the buyers are all Chinese,” said a market source. 

Meanwhile, the market would focus on the US consumer price inflation data due on December 13. Moreover, the Fed is expected to increase rates by 50 basis points for the month. SHFE stockpiles, too, improved marginally over the week.  

The summary from our predictive forecasting this week:

To see more and compare physical and futures spread, click here. Email any of our team members to understand our forecasting solution.

Buying frenzy amid price rally

Spot market rally continued amid some buying frenzy as the Chinese buying returned post reports of some relaxation of China’s covid restrictions supported by some gains in Yuan against the US dollar. As a result, the prices over the week saw a rise of 4.7-6% across the board.

According to Helixtap market intelligence, there was some panic buying in the market with the return of the Chinese buying, which pushed the market over the week. “China market giving back some of the earlier climbs,” said a Singapore-based source.

The buying from China picked up later in the week, largely arbitrage buying. The large drawdown in SHFE stockpile, which according to market sources, are old stocks consumed in the physical market, typically in November. While this worked last week amidst the weaker Yuan and high Thai raw material prices, this week Yuan appreciated amid the dovish stance of the Fed. Helixtap assessed Technically Specified Rubber (TSR) 20 at US$1390/mt CIF China, up US$ 80 over the week.

Meanwhile, the supply of Thai raw materials also eased over the week due to improved weather conditions in the South of Thailand. However, producers noted that the weather in the South of Thailand is expected to improve for the next few days. “But rain will probably return soon as it’s rainy season in Southern Thailand,” said a producer source. As a result, Helixtap assessed Thai raw at THB 38.5/kg, up THB 1, while Latex Bulk at US$ 1010/mt FOB Bangkok/LCB, up US$50, over the week. As a result, the Thai sellers raised the offers.

However, the raw material situation is way tighter for the Indonesian market owing to wintering. The supply tightness coupled with some uptick in buying, Indonesian raw material prices found some support. The producers noted the raw material prices are “fricking high”. Helixtap Indonesian raw material price was also up IDR 1150 at IDR 19,500/kg over the week.

The Indonesian rubber prices, too, saw support. However, the gap between Thai and Indonesian rubber continued to be negative making Indonesian rubber the most economical option. There were a few trades of SIR 20 reported in the range of US$1315- US$1335/mt FOB Belawan/Surabaya.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1325/mt FOB Belawan/Surabaya, up US$20 and Standard Thailand Rubber (STR) 20 at US$1365/mt FOB Bangkok/Laem Chabang, up US$25, and African Rubber (AFR) 10 at US$1350/mt CIF Rotterdam/Hamburg, up US$20 on December 02, 2022.

Positive cues from China and active Chinese buying supported spot prices

Spot market rallied on active Chinese buying with support from some reports of easing Covid restrictions in China coupled with minor hike indications from the Fed. As a result, the market activity propped up during the day, with a traded level around 2-3% higher than the previous day.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1305/mt FOB Belawan/Surabaya, up US$25, and Standard Thailand Rubber (STR) 20 at US$1340/mt FOB Bangkok/Laem Chabang, up US$ 35, and African Rubber (AFR) 10 at US$1330/mt CIF Rotterdam/Hamburg, up US$25 on December 01, 2022.

Continued support from Chinese buying supported the market during the Asian trade day, with prices northbound across the board. The positive sentiment in the market was further amplified by more certainty related to China's reopening. Moreover, increased policy support for the battered property sector improved market sentiment.

According to Helixtap's market intelligence, there were ample Chinese inquiries. While some attributed hike to some arbitrage buying, others believed this was part of the Lunar New Year restocking. "China buying was muted as the warehouse was stuff cheaper. But it changed today. However, only arbs are buying, not end users," said a Singapore-based source.

Despite the rally in prices, there was skepticism among the market participants. "Producers do not know how to offer. Consumers also do not know how to bid," said another Singapore-based source.

Meanwhile traded level for STR 20 was at US$1340/mt FOB Bangkok/Laem Chabang for January shipments, while the Thai producers raised their offers to US$1350- US$1370/mt FOB Bangkok/Laem Chabang. The Indonesia rubber, too, reported a higher traded level at US$1305-US$1310/mt FOB Belawan/Surabaya for February shipments.

Further supporting the market were indications from Fed to reduce the size of rate hikes from next month despite signs that monetary policy is likely to stay restrictive until inflation is under control. This strengthened the US dollar, lending some breather space for the producers.

Strong yuan overthrew sluggish economic cues from China, Spot prices firm

The market participants looked past the disappointing Chinese data and an escalation of protests amid propped-up Chinese buying interest on the weakening US dollar against Yuan, lending some support for the prices.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1280/mt FOB Belawan/Surabaya, up US$7.5, and Standard Thailand Rubber (STR) 20 at US$1305/mt FOB Bangkok/Laem Chabang, up US$ 5, and African Rubber (AFR) 10 at US$1305/mt CIF Rotterdam/Hamburg, up US$10 on November 30, 2022.

Chinese buying continued to support the market during the Asian trade day, with prices northbound across the board. However, caution was prevalent amid the market around China's reopening after its disappointing manufacturing data. Moreover, the week is likely to be interesting as a lot of macro data is due from the US, which could trigger the price correction.

However, some reports of restocking in China, possibly a part of the Lunar New Year restocking, coupled with some strength in the Yuan against the US dollar, revved up the market. While this benefited the rubber market during the day as buying found some support, the producers could not book larger margins that usually cash upon the dollar difference.

Furthermore, higher raw material prices also supported the prices during the day. The Thai producers held on to their offers for STR 20, which ranged between US$1310- US$1340/mt FOB Bangkok/Laem Chabang for January shipments, while the buying interest improved to US$1300/mt level on FOB basis. The Indonesia rubber, too, reported a higher traded level at US$1280/mt FOB Belawan/Surabaya for February shipments.

However, there is still a lot of uncertainty around the demand for the forward months, especially amid sluggish European and US demand. Meanwhile, Indonesian rubber continues to be the most economical option in the market, and producers also hit the bid despite being in negative, margin-wise.

Indonesian Grade Rubber Cheapest - Indicator of support level or weak global demand?

(29 Nov) Prices continued to remain supported despite China protests, but the market remains uncertain of global demand going forward. 

• Helixtap Assessed SIR20 FOB  1,272.50  USD/MT  Belawan Surabaya
• Helixtap Assessed STR20 FOB 1,300 USD/MT Bangkok Laem Chabang
• Helixtap Assessed AFR10 CIF 1,295 USD/MT Hamburg Rotterdam

Indonesian Grades Most Competitive - even against typically cheaper Vietnamese Grades

Looking at November figures (Image 1 below) based on Helixtap’s prices assessments, Indonesia continued its trend of trading under Thai grades at an average of USD/MT (-24.30). As of this month, Indonesian prime grade SIR20 has been around the same range as Vietnamese SVR10, which typically trades at a discount to Thai and Indonesian grades. Today, Vietnamese grades were offered at between 1,260 - 1,290 USD/MT for Dec and Jan FOB Ho Chi Minh. This is about +30 USD/MT higher than Indonesian grades. 

Image 1: Physical Prices Assessment Comparison across different origins

Source: Helixtap Proprietary Physical Assessments

* AFR10 data starts from 2017
 

Europe and China short term demand muted, amidst cautious buying and weaker importing currencies 

Amidst the different factors in Europe, the Euro weakened against the USD crossing the 1.00 mark in September and further weakened the buying power of European tyre manufacturers. This also directly affected African suppliers, some of whom fixed their supply contracts in EUR with various consumers.
 

China, which consumes approximately 40% of the world’s rubber also experienced a sharp  November drawdown in stockpiles. According to a Chinese trader Helixtap spoke to, mentioned that “Forward arrival of cargoes are trading at a discount and Chinese tire makers are just buying hand to mouth”. He also added that “the SHFE stockpile drawdown is typically in November and are delivered as they are old stocks and will be consumed in the physical market.” This is good timing amidst the weaker Yuan and high Thai raw material prices. 

This week, Thai grades barely exchanged hands as the offers were not competitive amidst cheaper Indonesian offers as well as Chinese buyers filled up with ample domestic grade from warehouses.
 

Image 2: Major Consumers and Producers Exchange Rate against STR20 Helixtap Physical Assessment

Source: Helixtap Proprietary Physical Assessments 

Exchange rate from midpoint of FX rates
 

Referring to image 3 below, whilst Vietnamese grades had to adjust their offers down sharply, it seems like the bigger Indonesian factories are buffering negative margins by importing African raw materials and leveraging off a strong USD to book in sales and capture market share whilst Thai suppliers also battle higher raw material costs. 
 

Image 3: Stronger USD, Weaker EUR and Weak IDR in past 3 months adding more complexity to the market

Indonesian Exports to China Rose amidst more competitive prices

Looking at Helixtap’s trade flow data (Image 4 below), we can see that Indonesian imports to China rose steadily in September. According to Helixtap’s Indonesian rubber grade assessment, September 2022 was at USD/MT 1,343.40 on average. Comparing the August 2022 average, Helixtap assessed Indonesian SIR20 was 222 USD/MT lower than September at USD/MT 1,565.40. Given a much cheaper Indonesian price, the current play for larger Indonesian suppliers is cost optimization, and market share play to send volume to China. We expect the volume for October and November to continue to rise vis as vis Thailand exports unless the gap between these 2 grades and Vietnamese grades narrows.

Image 4: Export Quantity (Kg) of Indonesia to China from Jan 2021 - Sep 2022

Market trading sideways, waiting for technical indicators to be reached to add to positions

Thai producers Helixtap spoke to mention “a large top 4 producer buying up raw materials at +3 Baht/Kg higher than the average, with that producer leading the pack at 40.50THB/Kg”. This could imply them filling in orders they have sold previously, as Thai sellers were very active in the last 2 weeks filling Chinese orders and quiet this week as raw material prices creeped up.

Other Chinese traders we spoke to are “waiting for SHFE to reach 13,000 RMB/Kg levels so they can deliver (sell) on to the exchanges”. This week, domestic levels were about 10,800 - 11,000 RMB/Kg, a level which most Chinese traders would still prefer to be sidelined. 

On the Indonesian producers front, it is a far cry from Q1 2022 where they were at 1,800 USD/MT. Producers and dealers seem to be hitting any bid that comes their way for spot trades, of which February is the most active contract. A producer Helixtap spoke to said, “The market is broken - raw material is tight, and yet, we keep selling at a discount to futures.”
 

Otherwise, a trader source Helixtap spoke to highlighted that “if the China protests doesn’t move the market down, then maybe the worst is over”.

Plunging Chinese stock & higher raw mat prices support prices 

A steep drop in the Chinese stock level and some uptick in the raw material prices support Thai spot rubber prices during the Asian trade day. In addition, some strength in the Chinese yuan shifted the Chinese focus to the warehouse inventory. Meanwhile, clashing sentiments in China amid anti-government protests and China’s decision to lower the reverse repo rate last week have kept the market participants cautious. 

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1262.5/mt FOB Belawan/Surabaya, down US$2.5, and Standard Thailand Rubber (STR) 20 at US$1295/mt FOB Bangkok/Laem Chabang, and African Rubber (AFR) 10 at US$1290/mt CIF Rotterdam/Hamburg, both up US$7.5 on November 28, 2022.

While the actual demand fundamentals remained essentially unchanged, the spot market saw some upward movement triggered by the sentiments influenced by macroeconomic factors. Contrary to the traditional impact of protests in the market, rubber prices found some support. 

Even though there was some arbitrage buying happening in the market, the buyers were cautious around the ongoing protest in China and the continued spike in Covid cases. Interestingly, there was a significant inventory drawdown of 54% for SHFE rubber warehouses, indicating a possible increase in demand domestically rather than through imports. This was the result of the depreciation of the Chinese yuan against the US dollar. 

Meanwhile, higher raw material prices prompted the Thai producers to hold on to their offers, with continued reports of rains in south Thailand. As a result, offers for STR 20 ranged between US$1310- US$1350/mt FOB Bangkok/Laem Chabang for January to March shipments. 

The Indonesian market remained sluggish, but the anticipation in the market capped the fall in the prices. There were a few trades of SIR 20 reported in the range of US$1260- US$1265/mt FOB Belawan/Surabaya for December to February shipments.

The summary from our predictive forecasting this week:

To see more and compare physical and futures spread, click here. Email any of our team members to understand our forecasting solution.

Rising covid cases in China overshadowed supply shortage

Supply tightness failed to support the market during the week as heavy weightage on Chinese sentiment coupled with fluctuation in the currencies against the US dollar widened the bid-offer gap. While the producers struggled through tightening margins, buyers were unwilling to book volumes despite low prices.  

The supply in the physical market was limited over the week due to raw material shortages in Indonesia and Thailand. However, with reports of wintering in Indonesia, raw material prices found some support, which was in Thailand as well, owing to continued rains. "Thailand is expecting further rainfalls this week, especially in the South. Hence the supply situation is expected to remain tight," a producer source said.

Meanwhile, some sellers opted to hold back based on the raw material prices. With offers for STR 20 ranging between US$1295- US$1330/mt FOB Bangkok/Laem Chabang for January shipments, some producers could not adjust. "I am not making margins at these levels after all the costs," said a Singapore-based source.

Helixtap assessed Thai raw at THB 37.5/kg, up THB 0.5, while Latex Bulk at US$ 960/mt FOB Bangkok/LCB, up US$10, over the week. Helixtap Indonesian raw material price was also up IDR 50 at IDR 18,350/kg over the week.

Meanwhile, the volatility in currency lent some breathing space for the producers. However, some market participants believe that the impact of currency on the demand side has started to fizzle out as the dollar has been strong for some time, so buyers have been hedging accordingly.

However, buyers were skeptical as a result of a wide bid and offer gap over the week. While some believe that the buying should happen as the prices are low, much would depend on the covid cases in China next week. "1 person has died in the last four months. So at some point in time, they will snap out of this. And currently, China is in deflation," said another producer source. Helixtap assessed Technically Specified Rubber (TSR) 20 at US$1310/mt CIF China, down US$ 30 over the week.

The price pullback was seen in the futures market amid the rising covid case in China, countering the previously over-bullish sentiment from China's reopening.

The bid and offer gap were narrower for Indo rubber than Thai rubber, indicating the sentiment of the sellers in the respective region. As a result, few trades of SIR 20 reported over the week in the range of US$1240- US$1265/mt FOB Belawan/Surabaya.

The market currently is largely sentiment-driven as the overall fundamentals are downcast. Therefore, the market expects more correction in the short-term period. However, this might impact the ongoing negotiations of long-term contracts as the buyers would want to pause and see the impact of the recent changes in the market.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 steady at US$1265/mt FOB Belawan/Surabaya, and Standard Thailand Rubber (STR) 20 at US$1287.5/mt FOB Bangkok/Laem Chabang, down US$2.5, and African Rubber (AFR) 10 at US$1282.5/mt CIF Rotterdam/Hamburg, down US$7.5 on November 25, 2022.

Spot prices mixed on bearish cues from Asia

Spot market remained mixed during the Asian trade day amid the bearish cues from Japan and China despite indicating a dovish stance from the Fed meeting; sources said Helixtap on Thursday.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1265/mt FOB Belawan/Surabaya, up US$5, Standard Thailand Rubber (STR) 20 at US$1290/mt FOB Bangkok/Laem Chabang and African Rubber (AFR) 10 at US$1290/mt CIF Rotterdam/Hamburg, both unchanged from November 23, 2022.

Some weakness in the Asian market coupled with appreciation in Asian currency against the US dollar kept the spot market activities muted during the day while the price remained mixed. Both buyers and sellers were holding on to their expectations bringing the market to a stalemate.

COVID cases continued to surge in China, with increased mobility restrictions and lockdowns, taking a toll on the economy and limiting buying interest. Furthermore, Japanese data released during the day showed a contraction in manufacturing activity at the fastest pace in two years in November. The Bank of Korea also raised its benchmark interest rates by 25 basis points hike to 3.25%.

The market indicators kept the buyers skeptical to book cargoes, anticipating more price correction. According to Helixtap's market intelligence, there was limited buying interest from China during the day.

However, the possibility of the Federal Reserve slowing its pace of interest rate hikes, coupled with hopes of the Chinese government to aid the real estate and financial sector and talks of China lowering the Reserve Requirement Ratio, capped the slide in the prices.

The bid and offer gap were narrower for Indo rubber than Thai rubber, indicating the sentiment of the sellers in the respective region. While the offer for January shipments of SIR 20 was at US$1270/mt FOB Belawan/Surabaya, buying interest was at US$1260/mt FOB Belawan/Surabaya. On the other hand, Thai producers held on to their offers amid continued rains in parts of Thailand. Offers for STR 20 were at US$1310- US$1320/mt FOB Bangkok/Laem Chabang, while the buying expectation was around US$1270- US$1280/mt FOB Bangkok/Laem Chabang.

Spot prices slide, more drop expected

Spot market slowed down during the Asian trade day with the market participants expecting more downside over the week amid anticipation around Fed rate hikes and rising covid cases in China; sources said Helixtap on Wednesday.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1260/mt FOB Belawan/Surabaya, down US$10, Standard Thailand Rubber (STR) 20 at US$1290/mt FOB Bangkok/Laem Chabang, down US$5, and African Rubber (AFR) 10 steady at US$1290/mt CIF Rotterdam/Hamburg, on November 23, 2022.

According to market intelligence, the market hike was triggered by positive cues from China upon the proposal of interest-free loans. However, global demand cues continue to remain bearish, which capped the prices rise. "It's (Price hike) more in response to China making interest-free loan," said a market source.

Some market participants feel the Chinese demand has to return soon as there have not been many reports of death lately, and the government would have to ease things as China is in deflation. However, Chinese authorities have imposed restrictions to check the rise in COVID-19, amplifying the worry amid the market that prices are for some more correction.

The traded level for January and February shipments of SIR 20 dropped to US$1260/mt FOB Belawan/Surabaya. Meanwhile, Thai producers held on to their offers amid a limited supply of raw materials. The reports of continued rains in parts of Thailand have propped up the raw material prices, as per the market source. Offers for STR 20 were at US$1310- US$1320/mt FOB Bangkok/Laem Chabang, while the buying expectation was around US$30/mt lower.

Meanwhile, there is some anticipation around the Fed's rate hike announcement due later in the day. The Fed has raised rates significantly over the year to curb inflation, and the market feels the Fed is closer to the end of the rate hiking cycle. "Fed expected to continue the hikes, but market expecting max 0.5%. Today's Fed minutes, if contrary, may cause prices to collapse," said the market source indicating more softening in the prices. 

Spot finds support on stronger currency; buyers resist

Rubber spot market gained on some technical rebound supported by stronger Asian currency and a tight supply of raw material; buyers resisted the hike stating weakness in the market fundamentals and rising covid cases in China; sources said Helixtap on Tuesday.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1270/mt FOB Belawan/Surabaya, up US$30, Standard Thailand Rubber (STR) 20 at US$1295/mt FOB Bangkok/Laem Chabang, up US$35, and African Rubber (AFR) 10 at US$1290/mt CIF Rotterdam/Hamburg, up US$10 on November 22, 2022.

The spot rubber market found some support during the day due to the technical rebound after a plunge in the spike in China’s covid cases the previous day. While it confused the market participants as the market fundamentals remained weak, the producers held on to their offers. The producers attributed the rise to some strength in the Asian currencies against the US dollar and some shortage in both Thai and Indo raw materials.

“Sellers have no urgency. Any bids can see but too low as it is hard to do based on the raw material prices,” said a Singapore-based source. As a result, a wide gap between the bids and offers led to muted market activities.

A trader source noted that trading activities from China remained muted due to the Covid cases spike. In addition, the market continued to worry about the reimposition of strict COVID curbs that could cause more disruptions in the market.

“The Covid situation in China is getting worse by the day. Guangzhao is in complete locked down. As a result, the physical market was very quiet, even though futures adjusted higher today,” said a producer source.

The offered level for February shipments of SIR 20 was at US$1285/mt FOB Belawan/Surabaya, while the buying interest was US$1255/mt on FOB basis. A similar sentiment was seen amid the Thai producers, with offers at US$1310/mt FOB Bangkok/Laem Chabang, while the buying expectation was around US$30/mt lower.

Spot rubber tumbles on sell-off in China after a spike in covid case. 

A massive sell-off in the market pulled the spot prices down during the Asian trade day as the spike in Covid cases in China coupled with a rise in stockpile in China compounded the worries of a global slowdown; sources said Helixtap on Tuesday.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1240/mt FOB Belawan/Surabaya, down US$45, Standard Thailand Rubber (STR) 20 at US$1260/mt FOB Bangkok/Laem Chabang, down US$50, and African Rubber (AFR) 10 at US$1280/mt CIF Rotterdam/Hamburg, down US$40 on November 21, 2022.

Coronavirus outbreaks across China have setback the hopes for an easing of restrictions leading to a lackluster opening for the rubber market. As a result, the prices saw a week-on-week drop of 2.5%-3.5% across the board during the day.

“Today selling is China Covid driven due to upticks in cases, death, and also a reversal in restrictions in places like Shijiazhuang,” said a Singapore-based source. The reversal in measures has sent jitters across the market, making both buyers and sellers cautious. 

The market currently is essentially sentiment driven as the overall fundamentals are downcast. Therefore, the market expects more correction in the short-term period. However, this might impact the ongoing negotiations of long-term contracts as the buyers would want to pause and see the impact of the recent changes in the market. 

“General sell-off in China commodities. There is a growing concern over the property market in China despite the Chinese government support,” said a trader source. The weakness in the property market has been a major market dampener, and the recent spike in covid cases added more pressure on the sentiments.

Moreover, weakness in the Asian currencies withered the buying capacity slowing the buyers down. The traded level for January shipments of SIR 20 dropped to US$1240/mt FOB Belawan/Surabaya during the day. Meanwhile, the Thai producers adjusted their offers to US$1270- US$1290/mt FOB Bangkok/Laem Chabang for December and January shipments.

The slide could also be a possible retreat after a spike in the prices last week, which according to some market participants, was a bit exaggerated. 

Meanwhile, there were reports of a fire in two rubber factories in Kedai Ledang Village, Kota Kisaran Timur District, Asahan. However, the impact was limited and likely to have a limited effect on the prices. 

The summary from our predictive forecasting this week:

To see more and compare physical and futures spread, click here.  Email any of our team members to understand our forecasting solution.

Spot prices find support from short covering & positive cues

The spot rubber market found some support from some short covering during the week, coupled with a series of unexpected positive moves in China and lower-than-expected consumer and wholesale inflation in the US.

As China relaxed some Covid restrictions to salvage the ailing economy, it triggered a price rally. There was some uptick in buying from China, pushing the prices up and lending some reprieve for the producers. In addition, some better-than-expected economic data has prompted some expectations amid the market participants that the central bank would have to slow its aggressive interest rate hikes.

The prop in the sentiment resulted in a rise of 1%-2% in the spot prices across the board. Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1285/mt FOB Belawan/Surabaya, up US$10 and Standard Thailand Rubber (STR) 20 at US$1310/mt FOB Bangkok/Laem Chabang, and African Rubber (AFR) 10 at US$1320/mt CIF Rotterdam/Hamburg, both up US$5 on November 18, 2022.

The traded level for February and March shipments of SIR 20 propped up to US$1285- US$1295/mt FOB Belawan/Surabaya during the day. Meanwhile, the Thai producers were seen holding on to their offers at US$1330/mt FOB Bangkok/Laem Chabang for January shipments. There was some buying interest for SMR as well.

Upbeat sentiment led to some short covering over the week. However, a spike in the Covid cases and rising SHFE stock could act as a deterrent in the coming week. Helixtap assessed Technically Specified Rubber (TSR) 20 at US$1340/mt CIF China, up US$ 20 over the week.

Meanwhile, Indonesian raw material supply remained tight, propping the prices up. On the Thai raw material, front producers welcomed limited demand in the market as the supply remained tepid amid rains.

“Market hasn’t changed much. Still very quiet and dormant. Rain still very much prevails in the South; hence not much supply is available. However, blessings in disguise as demand also remains very slow,” said a producer source. Helixtap assessed Thai raw at THB 37/kg, steady over the week, while Latex Bulk at US$ 950/mt FOB Bangkok/LCB, up US$25, over the week. However, Helixtap Indonesian raw material price was up IDR 550 at IDR 18,300/kg over the week.

Indo rubber diverted to China as arbitrage window widens

The widening spread between Thai and Indo rubber has reopened the arbitrage economics between Indonesia and China. As a result, despite the limited movement of Indonesian rubber into the Chinese market traditionally, a few delayed cargoes have been diverted to China, leading to a 13% rise in exports in September 2022 compared to August. 

There is some arbitrage window for delivery in the Shanghai futures exchange. As a result, some producers diverted their delayed shipments to China to maintain cash flow. According to Helixtap market intelligence, the trend indicates a potential resurgence of Indonesian rubber demand, which has been struggling with demand uncertainties and huge margin pressure. 

“A lot of SIR going to China,” said a trader source. Another market source added that the diverted, delayed cargoes are either exchange delivery or for forward buying. The sellers might want to capitalize on some of their cargoes afloat at a lower than market level price rather than bear the costs.

As per the market sources, producers with some presence in Singapore has the arbitrage factor working for them as the freight is relatively less from Singapore to China than from Indonesia to China. However, other producers struggling with volume might follow the trend irrespective of the frieght factor to maintain the cash flow. 

According to Helixtap data, imports from Indonesia picked up in the last two months.

Source: Helixtap & Customs data 

A widening Thai-Indo spread has reopened the arbitrage window between the two regions. The average gap between the SIR 20 and STR 20 dropped to around US$23/mt which averaged at US$17.5/mt in October. The spread has been consistently in the negative territory since mid-September after reaching as high as US$125/mt in May 2022. 

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1275/mt FOB Belawan/Surabaya and Standard Thailand Rubber (STR) 20 at US$1305/mt FOB Bangkok/Laem Chabang both unchanged from November 16, 2022.

Source: Helixtap 

Given the continued bearish demand cues across the globe, some companies might be motivated to finalize volume on their books before the year's end by selling volumes into China and closing their current physical positions.

Uncertainties persist in China 

Meanwhile, premature to say that China will reclaim the status of a prime buyer for Indonesian rubber given the tough competition from Africa, which to has been off-loading its volumes into China amid bearish demand from the western market.

Most sellers likely staying afloat and waiting for the tire demand or for the long-term contract negotiations to kick in. Due to inflationary pressure and rising geo-political tension, tepid demand from major buying countries, including Europe and US, has weighed on the Indonesian rubber prices directing the arbitrage flow.

In addition, rising COVID-19 cases in China weighed on sentiment despite the hopes raised by easing restrictions this week. Furthermore, sluggish import demand in India owing to oversupply in the domestic market has also been a trigger. Many cargoes from Indonesia have been redirected to India instead of China in the past, owing to cheaper freight rates.

According to Helixtap data, a similar trend was seen in August 2021. However, the flow was limited to a few cargoes.

Source: Helixtap

Moreover, amid the disgruntled situation in Europe, there was some buying interest for African rubber in China, with offers for AFR 10 at around US$ 1315-1320/mt on CIF basis. “It is difficult for the moment (African rubber to Europe) as the Euro vs. USD exchange rate is wreaking the market increase for the African producers being paid in euro,” said a market source earlier this week. Helixtap assessed African Rubber (AFR) 10 steady at US$1315/mt CIF Rotterdam/Hamburg, on November 17, 2022.

Rising geo-political tension & Chinese Covid cases halt price rally

The surge in covid cases in China and escalation in the Ukraine war as Russian missiles killed two people in Poland rattled the market by muting the activities during the Asian trade day, capping any further rise in the prices; sources said Helixtap on Wednesday.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1275/mt FOB Belawan/Surabaya, down US$7.5, Standard Thailand Rubber (STR) 20 at US$1305/mt FOB Bangkok/Laem Chabang, and African Rubber (AFR) 10 at US$1315/mt CIF Rotterdam/Hamburg, both down US$10 on November 16, 2022.

As expected, the spot prices moved southbound amid muted demand and the absence of some of the major buyers in the market. In addition, rising COVID-19 cases in China weighed on sentiment despite the hopes raised by easing restrictions this week. “China was active yesterday,” said a Singapore-based source adding the buyers were possibly trying to make the most of the arbitrage in the market.

The market participants deemed the market quiet. As a result, the traded level for January shipments of SIR 20 dropped to US$1275- US$1280/mt FOB Belawan/Surabaya during the day. Thai producers, too, were seen adjusting their offers to US$1320/mt FOB Bangkok/Laem Chabang for December shipments.

However, amid the disgruntled situation in Europe, there was some buying interest for African rubber in China, with offers for AFR 10 at around US$ 1315-1320/mt on CIF basis. “It is difficult for the moment (African rubber to Europe) as the Euro vs. USD exchange rate is wreaking the market increase for the African producers being paid in euro,” said a market source.

To weigh the market further down, oil prices too remained downcast owing to rising cases of Covid in China. Hence, the buyers were cautious amid the negative cues from the market and opted to slow down. Meanwhile, fears of an escalation in the Ukraine war, too, sent jitters across the market.

Chinese aid supports spot prices, Indo raw material supply tight

Speculation continued to play the market upward during the Asian trade day amid some positive news from China to support the yuan. While the Thai rubber prices steadied over the day, Indonesian prices remained firm on raw material shortage; sources said Helixtap on Tuesday.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1282.5/mt FOB Belawan/Surabaya, up US$12.5, Standard Thailand Rubber (STR) 20 at US$1315/mt FOB Bangkok/Laem Chabang, and African Rubber (AFR) 10 at US$1325/mt CIF Rotterdam/Hamburg, both up US$5 on November 15, 2022.

The market found some support as the Chinese central bank kept the interest rate unchanged for the third consecutive month to support the yuan against the US dollar. Even though there are reports of some relaxation in the Covid restrictions, the mounting pressure amid a fresh wave of COVID outbreaks might lead to further loss of momentum. However, according to Helixtap market intelligence, the finished goods stock in China is healthy. “Seems like everyone is looking forward to Q2 2023 (demand for tires),” said a market source.

The Thai producers were seen holding on to their offers at US$1330/mt FOB Bangkok/Laem Chabang for December and January shipments with the buying interest ay US$1300/mt on FOB basis. “Market looks more speculative on the news than strong in trades,” said a trader source.

There was some strength in the futures market, which made the market skeptical of the way forward as activities in the physical market were sporadic. The sentiments remained muted as the market awaits the development of the G20 summit starting today.

Meanwhile, Indonesian rubber continued to see some activities being the most economical option and further supported by the shortage of raw materials. As a result, the traded level for December to February shipments of SIR 20 propped up to US$1280- US$1290/mt FOB Belawan/Surabaya during the day.

The gap between the Indonesian and Thai rubber has dropped to negative US$32.5 from negative US$15 earlier in November. The margins, however, are under pressure for the Indonesian producers, especially amid the volatility in the market.

However, a continuous shortage might lead to a spike in the inflow of African raw materials into the Indonesian market, as seen in March 2022. There was some rise in imports of African raw materials in August. However, it had a limited impact on an already southbound market then. The average cost of import for African raw materials in August 2022 was around US$1047/mt, while Indonesian raw material prices averaged US$1460/mt.

Spot price rally continues; dip expected later in the week 

Spot rubber market continued last week’s rally as the market sentiment gained confidence in China’s announcement of aid for the property sector. However, some producers opted to stay out of the market, trying to limit the risk from the speculation-triggered rise in the prices; sources said Helixtap on Monday. 

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1270/mt FOB Belawan/Surabaya, up US$10, Standard Thailand Rubber (STR) 20 at US$1310/mt FOB Bangkok/Laem Chabang, up US$ 20, and African Rubber (AFR) 10 at US$1320/mt CIF Rotterdam/Hamburg, up US$ 10 on November 14, 2022.

The price rally in the spot market continued on Monday amid borrowed optimism from China’s announcement to aid the property sector. “Positivity continued from last week. The market found bullish news on China,” said a Singapore-based source. 

While the optimism was good for the prices, the core fundamentals were still weak, which kept the market participants cautious. However, some improvement in buying prices was seen as traded level for January and February shipments of SIR 20 propped up to US$1270- US$1275/mt FOB Belawan/Surabaya during the day. Thai producers, too, raised their offers to US$1330- US$1340/mt FOB Bangkok/Laem Chabang for December and January shipments.

The current uptick in the prices is primarily driven by speculation, thus, unlikely to sustain. The volatility in the current market is further underscored by the correction in the oil prices dragged down by a firmer U.S. dollar and record high coronavirus cases in major Chinese cities.

While, during the day, the weakness in the Asian currency against the U.S. dollar supported the prices, the spot market is likely to slide down over the week amid a spike in covid cases in China. Some producers, as a result, opted to stay out of the market to insulate themselves from the volatility. Most market participants noted that there were few producers in the market. The situation was slightly more critical for the Indonesian producers amid reports of some raw material shortages. “Indonesian producers are not making money now heard lack of raw materials again,” said another Singapore-based source.

The summary from our predictive forecasting this week:

To see more and compare physical and futures spread, click here. Email any of our team members to understand our forecasting solution.

Volatility continues in spot prices, uncertainty around China worries market

The spot prices closed the week on some ease in Chinese covid restrictions and a drop in US inflation. However, the market is uncertain of the way forward as the week was choppy amid the speculations around the sustainability of the rebound and fickle buying from China.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1260/mt FOB Belawan/Surabaya, up US$10, Standard Thailand Rubber (STR) 20 at US$1290/mt FOB Bangkok/Laem Chabang, up US$ 20, and African Rubber (AFR) 10 at US$1310/mt CIF Rotterdam/Hamburg, up US$ 10 on November 11, 2022.

China has announced a reduction in quarantine time and removed some restrictions on international flights, indicating its easing stance on the zero-Covid policy. “Market seems positive with China easing covid entry news,” said a Singapore-based trader.

With increased Chinese activities during the day, prices all across the board found some support. The traded level for January and February shipments of SIR 20 propped up to US$1260- US$1265/mt FOB Belawan/Surabaya during the day. Meanwhile, the Thai producers were seen adjusting offers raising it to US$1320/mt FOB Bangkok/Laem Chabang for December shipments.

Helixtap assessed Technically Specified Rubber (TSR) 20 at US$1320/mt CIF China, up US$ 70 over the week, the highest intra-week hike since March 2022.

In addition, better-than-expected US inflation data also supported the market sentiment. The latest US consumer price index climbed 0.4%, bringing the annual rate down to 7.7% from 8.2% in September. This lent some support to the Asian currencies against the US dollar, increasing the buying capacity for the dollar-traded rubber. However, easing inflation is unlikely to waver Fed from further tightening, which would impact the liquidity and demand in the market.

As a result, some market participants are still uncertain of the sustainability of these levels amid overall weaker demand cues. Meanwhile, projections of high energy costs in Q4 2022 would also impact the tire makers weighing on their demand.

Raw material northbound

Raw material prices remained northbound over the week despite the demand being bearish. “Rubber and latex market is largely unchanged. Although we are hearing about China easing its Covid policies, demand remains low, and so are the prices,” said a producer source. With continued rains in the southern region of Thailand, the prices found some support but limited demand capped the rise. 
 

Helixtap assessed Thai raw at THB 37/kg, up THB 2, and Latex Bulk at US$ 925/mt FOB Bangkok/LCB, up US$75, over the week. Helixtap Indonesian raw material price, too, was up IDR 250 at IDR 17,750/kg over the week.

Spot prices dive, buyers cautious  

The market sentiment took a dive during the Asian trade day as the buyers were cautious muting the market activities; sources said Helixtap on Thursday. 

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1250/mt FOB Belawan/Surabaya, down US$10, Standard Thailand Rubber (STR) 20 at US$1270/mt FOB Bangkok/Laem Chabang, down US$ 15, and African Rubber (AFR) 10 steady at US$1300/mt CIF Rotterdam/Hamburg, on November 10, 2022.

The weakness in Chinese demand spilled over into the markets. The crash in the crypto market worsened the sentiment. Even though there are expectations that the Fed might slow down its rate hikes from December, rates are also expected to peak at higher levels.

While the weakness in Asian currencies against the US dollar should have lent some support. However, the diminishing buying capacity capped any up in the market. Moreover, a the drop in oil prices added to the bearishness in the market. 

The market environment is likely to remain unfavorable amid the slowdown in the tire demand amid the economic slowdown and inflationary pressure. As a result, rubber prices are likely to continue the southbound movement. 

The buying interest for February shipments of SIR 20 dropped to US$1245/mt FOB Belawan/Surabaya during the day, with sellers largely sidelined. Meanwhile, the Thai producers were seen adjusting offers and, correcting them to US$1290/mt FOB Bangkok/Laem Chabang for December shipments.

Market loses steam, Chinese buying withering 

With limited interest in Indonesian rubber from China, Indonesian rubber failed to keep up the momentum during the Asian trade day, making the Indonesian producers skeptical of the outlook and the return of the southbound movement, sources said Helixtap on Wednesday. 

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1260/mt FOB Belawan/Surabaya, down US$2.5, Standard Thailand Rubber (STR) 20 at US$1285/mt FOB Bangkok/Laem Chabang, up US$ 5, and African Rubber (AFR) 10 steady at US$1300/mt CIF Rotterdam/Hamburg, on November 09, 2022.

Indonesian rubber was the first to break the upward movement in the market amid limited interest from China. The producers seemed a bit shaky and concerned about the possible return of the southbound direction in the market. “Rubber market continues to be tough,” said a Singapore-based source. 

With the continued strain on the margins and sales, the Indonesian market might see some more shutdowns of the factories and consolidation. As a result, the traded level for January/February shipments of SIR 20 dropped to US$1255- US$1265/mt FOB Belawan/Surabaya during the day.

STR 20 prices, however, continued to hold firm, banking on the Chinese demand to continue even though the signals might indicate otherwise. According to Helixtap market intelligence, there was a spike in buying from China from the dealers earlier in the day, which fizzled out later. Furthermore, the weakness in Yuan against the US dollar also dented the Chinese buying capacity.

The traded level for STR 20 mixture into China also dropped to US$1320/mt CIF China. However, offers for STR 20 for December cargoes were marginally up at US$1300-US$1310/mt FOB Bangkok/Laem Chabang.

Renewed stress on a continued zero covid stance earlier this week has sparked worries among the market participants. Furthermore, the drop in China’s October annualized producer prices for the first time since December 2020 dented the market confidence. Meanwhile, the market awaits US mid-term election results and the inflation data. The buyers continued to remain cautious.

Chinese continued to support prices

The spurt in Chinese buying continued to support the spot prices during the Asian trade day as some believed this buying could be a part of the restocking for Chinese New Year; sources said Helixtap on Tuesday.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1262.5/mt FOB Belawan/Surabaya, up US$22.5, Standard Thailand Rubber (STR) 20 at US$1280/mt FOB Bangkok/Laem Chabang, up US$ 20, and African Rubber (AFR) 10 at US$1300/mt CIF Rotterdam/Hamburg, up US$ 20 on November 08, 2022.

Continued buying from China over the week kept the prices firm. According to Helixtap market intelligence, there is active buying on the dealer’s end. Given the recent appreciation of the Yuan against the U.S. dollar, there is some rebound in the Chinese buying capacity. The traded level for STR 20 mixture into China increased to US$1340/mt CIF China.

Moreover, with the Chinese New Year earlier in 2023, this buying could be a part of the restocking activities. Furthermore, the prices were at two years low, which could have also prompted the buying. “China buying up...note that CNY is pretty early for 2023,” said a Singapore-based source.

Meanwhile, despite Indonesian rubber still being the most economical option, it failed to find its market in China. The traded level for January/February shipments of SIR 20 soared to US$1260- US$1265/mt FOB Belawan/Surabaya during the day. In addition, the Bank of Japan’s decision to keep the interest rates unchanged also supported the buying interest from Japanese buyers.

The western market demand remained sluggish ahead of the midterm elections and key inflation data on deck. According to some Africa-based sources, there is little demand from the western markets, despite the market moving upwards.

Meanwhile, the market fundamentals are still bearish amid a contraction in Chinese exports and imports in October as China grappled with COVID-19 curbs coupled with the expectation that the U.S. consumer price index might indicate higher inflation. “With such macro fundamentals, I am doubtful the uptick would sustain,” said the Singapore-based source.

Spot gains, Chinese traders short as China re-enforces zero-Covid pledge

The spot market gained driven by an upswing in the sentiment, while some Chinese traders shorted their positions during the Asian trade day as China re-enforced its zero- Covid pledge; sources said Helixtap on Monday. 

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1240/mt FOB Belawan/Surabaya, up US$15, Standard Thailand Rubber (STR) 20 at US$1260/mt FOB Bangkok/Laem Chabang, up US$ 20, and African Rubber (AFR) 10 at US$1280/mt CIF Rotterdam/Hamburg, up US$45 on November 07, 2022.

The upswing in the market continued, lending spot rubber a strong opening for the week. The uptick was largely triggered by the speculation about China “conditional” relaxing its stringent Covid policy. As a result, prices all across the board rose 6-8% in November. 

However, the reality is a bit different as some Chinese traders short their positions anticipating a drop in the market as Chinese health officials renewed their stance of zero-Covid strategy coupled with some strength in the Yuan against the U.S. dollar. As a result, the market is likely to dampen even though the prices were northbound. “Market is choppy, news-driven, all eyes on China now,” said a Singapore-based source. 

With Indonesian rubber still being the most economical amid the basket, SIR 20 will likely continue its uptick over the week. The traded level for January/February shipments of SIR 20 soared to US$1240- US$1245/mt FOB Belawan/Surabaya during the day, up around 1.2% since November 04, 2022.

The buyers are skeptical, but according to Helixtap market intelligence, there was some pick up in the Chinese buying last week, driving the market today. “China has been quite active in buying in the upswing last week,” a trader source noted. The traded level for STR 20 mixture into China hovered between US$1290-US$1310/mt CIF China.

Meanwhile, some of the African producers were covering for raw materials despite some uptick in the African raw material prices. With a limited appetite for risk, both U.S. and European markets have slowed down. The market is still assessing mixed U.S. jobs report amid talks of the White House privately encouraging Ukraine to negotiate with Russia.

The summary from our predictive forecasting this week:

To see more and compare physical and futures spread, click here. Email any of our team members to understand our forecasting solution.

Buyers take a step back, uncertain of outlook; spot steady 

The spot prices steadied during the Asian trade day as some of the major tire makers took a step back to assess the market amid a public holiday in Thailand and the US dollar losing strength against the Asian currencies. However, market participants were skeptical of the sustainability of the rally in the market. 

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1325/mt FOB Belawan/Surabaya, Standard Thailand Rubber (STR) 20 at US$1365/mt FOB Bangkok/Laem Chabang, and African Rubber (AFR) 10 at US$1350/mt CIF Rotterdam/Hamburg, all unchanged from December 02, 2022.

Some market participants hugged the sidelines during the day, trying to assess the market direction. While the forward months still look bearish, the spot market has been firm on account of positive cues from China and the return of Chinese buying. 

With Thailand soon hitting its peak production period, there is much anticipation among the market participants. “I think a lot of producers are short, and they expect some sort of drop when peak period hits,” said a trader source. 

However, the relaxation of some of the pandemic restrictions in China has brightened the outlook for global growth and commodity demand. In addition, the weakness in the US dollar down against the Asian currencies has further supported the market.

This, however, would impact the producers, who might find it challenging to book profit as they usually cash upon the dollar difference. There was buying interest for SIR 20 at US$1320/mt FOB Belawan/Surabaya, with no counter offers.

While the western markets are still struggling with economic setbacks and inflationary pressure, China is the only active buyer in the market. As a result, all the eyes are on China now. “All the US and EU tire majors stopped buying and have to wait till next year. So right now, the buyers are all Chinese,” said a market source. 

Meanwhile, the market would focus on the US consumer price inflation data due on December 13. Moreover, the Fed is expected to increase rates by 50 basis points for the month. SHFE stockpiles, too, improved marginally over the week.  

The summary from our predictive forecasting this week:

To see more and compare physical and futures spread, click here. Email any of our team members to understand our forecasting solution.

Buying frenzy amid price rally

Spot market rally continued amid some buying frenzy as the Chinese buying returned post reports of some relaxation of China’s covid restrictions supported by some gains in Yuan against the US dollar. As a result, the prices over the week saw a rise of 4.7-6% across the board.

According to Helixtap market intelligence, there was some panic buying in the market with the return of the Chinese buying, which pushed the market over the week. “China market giving back some of the earlier climbs,” said a Singapore-based source.

The buying from China picked up later in the week, largely arbitrage buying. The large drawdown in SHFE stockpile, which according to market sources, are old stocks consumed in the physical market, typically in November. While this worked last week amidst the weaker Yuan and high Thai raw material prices, this week Yuan appreciated amid the dovish stance of the Fed. Helixtap assessed Technically Specified Rubber (TSR) 20 at US$1390/mt CIF China, up US$ 80 over the week.

Meanwhile, the supply of Thai raw materials also eased over the week due to improved weather conditions in the South of Thailand. However, producers noted that the weather in the South of Thailand is expected to improve for the next few days. “But rain will probably return soon as it’s rainy season in Southern Thailand,” said a producer source. As a result, Helixtap assessed Thai raw at THB 38.5/kg, up THB 1, while Latex Bulk at US$ 1010/mt FOB Bangkok/LCB, up US$50, over the week. As a result, the Thai sellers raised the offers.

However, the raw material situation is way tighter for the Indonesian market owing to wintering. The supply tightness coupled with some uptick in buying, Indonesian raw material prices found some support. The producers noted the raw material prices are “fricking high”. Helixtap Indonesian raw material price was also up IDR 1150 at IDR 19,500/kg over the week.

The Indonesian rubber prices, too, saw support. However, the gap between Thai and Indonesian rubber continued to be negative making Indonesian rubber the most economical option. There were a few trades of SIR 20 reported in the range of US$1315- US$1335/mt FOB Belawan/Surabaya.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1325/mt FOB Belawan/Surabaya, up US$20 and Standard Thailand Rubber (STR) 20 at US$1365/mt FOB Bangkok/Laem Chabang, up US$25, and African Rubber (AFR) 10 at US$1350/mt CIF Rotterdam/Hamburg, up US$20 on December 02, 2022.

Positive cues from China and active Chinese buying supported spot prices

Spot market rallied on active Chinese buying with support from some reports of easing Covid restrictions in China coupled with minor hike indications from the Fed. As a result, the market activity propped up during the day, with a traded level around 2-3% higher than the previous day.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1305/mt FOB Belawan/Surabaya, up US$25, and Standard Thailand Rubber (STR) 20 at US$1340/mt FOB Bangkok/Laem Chabang, up US$ 35, and African Rubber (AFR) 10 at US$1330/mt CIF Rotterdam/Hamburg, up US$25 on December 01, 2022.

Continued support from Chinese buying supported the market during the Asian trade day, with prices northbound across the board. The positive sentiment in the market was further amplified by more certainty related to China's reopening. Moreover, increased policy support for the battered property sector improved market sentiment.

According to Helixtap's market intelligence, there were ample Chinese inquiries. While some attributed hike to some arbitrage buying, others believed this was part of the Lunar New Year restocking. "China buying was muted as the warehouse was stuff cheaper. But it changed today. However, only arbs are buying, not end users," said a Singapore-based source.

Despite the rally in prices, there was skepticism among the market participants. "Producers do not know how to offer. Consumers also do not know how to bid," said another Singapore-based source.

Meanwhile traded level for STR 20 was at US$1340/mt FOB Bangkok/Laem Chabang for January shipments, while the Thai producers raised their offers to US$1350- US$1370/mt FOB Bangkok/Laem Chabang. The Indonesia rubber, too, reported a higher traded level at US$1305-US$1310/mt FOB Belawan/Surabaya for February shipments.

Further supporting the market were indications from Fed to reduce the size of rate hikes from next month despite signs that monetary policy is likely to stay restrictive until inflation is under control. This strengthened the US dollar, lending some breather space for the producers.

Strong yuan overthrew sluggish economic cues from China, Spot prices firm

The market participants looked past the disappointing Chinese data and an escalation of protests amid propped-up Chinese buying interest on the weakening US dollar against Yuan, lending some support for the prices.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1280/mt FOB Belawan/Surabaya, up US$7.5, and Standard Thailand Rubber (STR) 20 at US$1305/mt FOB Bangkok/Laem Chabang, up US$ 5, and African Rubber (AFR) 10 at US$1305/mt CIF Rotterdam/Hamburg, up US$10 on November 30, 2022.

Chinese buying continued to support the market during the Asian trade day, with prices northbound across the board. However, caution was prevalent amid the market around China's reopening after its disappointing manufacturing data. Moreover, the week is likely to be interesting as a lot of macro data is due from the US, which could trigger the price correction.

However, some reports of restocking in China, possibly a part of the Lunar New Year restocking, coupled with some strength in the Yuan against the US dollar, revved up the market. While this benefited the rubber market during the day as buying found some support, the producers could not book larger margins that usually cash upon the dollar difference.

Furthermore, higher raw material prices also supported the prices during the day. The Thai producers held on to their offers for STR 20, which ranged between US$1310- US$1340/mt FOB Bangkok/Laem Chabang for January shipments, while the buying interest improved to US$1300/mt level on FOB basis. The Indonesia rubber, too, reported a higher traded level at US$1280/mt FOB Belawan/Surabaya for February shipments.

However, there is still a lot of uncertainty around the demand for the forward months, especially amid sluggish European and US demand. Meanwhile, Indonesian rubber continues to be the most economical option in the market, and producers also hit the bid despite being in negative, margin-wise.

Indonesian Grade Rubber Cheapest - Indicator of support level or weak global demand?

(29 Nov) Prices continued to remain supported despite China protests, but the market remains uncertain of global demand going forward. 

• Helixtap Assessed SIR20 FOB  1,272.50  USD/MT  Belawan Surabaya
• Helixtap Assessed STR20 FOB 1,300 USD/MT Bangkok Laem Chabang
• Helixtap Assessed AFR10 CIF 1,295 USD/MT Hamburg Rotterdam

Indonesian Grades Most Competitive - even against typically cheaper Vietnamese Grades

Looking at November figures (Image 1 below) based on Helixtap’s prices assessments, Indonesia continued its trend of trading under Thai grades at an average of USD/MT (-24.30). As of this month, Indonesian prime grade SIR20 has been around the same range as Vietnamese SVR10, which typically trades at a discount to Thai and Indonesian grades. Today, Vietnamese grades were offered at between 1,260 - 1,290 USD/MT for Dec and Jan FOB Ho Chi Minh. This is about +30 USD/MT higher than Indonesian grades. 

Image 1: Physical Prices Assessment Comparison across different origins

Source: Helixtap Proprietary Physical Assessments

* AFR10 data starts from 2017
 

Europe and China short term demand muted, amidst cautious buying and weaker importing currencies 

Amidst the different factors in Europe, the Euro weakened against the USD crossing the 1.00 mark in September and further weakened the buying power of European tyre manufacturers. This also directly affected African suppliers, some of whom fixed their supply contracts in EUR with various consumers.
 

China, which consumes approximately 40% of the world’s rubber also experienced a sharp  November drawdown in stockpiles. According to a Chinese trader Helixtap spoke to, mentioned that “Forward arrival of cargoes are trading at a discount and Chinese tire makers are just buying hand to mouth”. He also added that “the SHFE stockpile drawdown is typically in November and are delivered as they are old stocks and will be consumed in the physical market.” This is good timing amidst the weaker Yuan and high Thai raw material prices. 

This week, Thai grades barely exchanged hands as the offers were not competitive amidst cheaper Indonesian offers as well as Chinese buyers filled up with ample domestic grade from warehouses.
 

Image 2: Major Consumers and Producers Exchange Rate against STR20 Helixtap Physical Assessment

Source: Helixtap Proprietary Physical Assessments 

Exchange rate from midpoint of FX rates
 

Referring to image 3 below, whilst Vietnamese grades had to adjust their offers down sharply, it seems like the bigger Indonesian factories are buffering negative margins by importing African raw materials and leveraging off a strong USD to book in sales and capture market share whilst Thai suppliers also battle higher raw material costs. 
 

Image 3: Stronger USD, Weaker EUR and Weak IDR in past 3 months adding more complexity to the market

Indonesian Exports to China Rose amidst more competitive prices

Looking at Helixtap’s trade flow data (Image 4 below), we can see that Indonesian imports to China rose steadily in September. According to Helixtap’s Indonesian rubber grade assessment, September 2022 was at USD/MT 1,343.40 on average. Comparing the August 2022 average, Helixtap assessed Indonesian SIR20 was 222 USD/MT lower than September at USD/MT 1,565.40. Given a much cheaper Indonesian price, the current play for larger Indonesian suppliers is cost optimization, and market share play to send volume to China. We expect the volume for October and November to continue to rise vis as vis Thailand exports unless the gap between these 2 grades and Vietnamese grades narrows.

Image 4: Export Quantity (Kg) of Indonesia to China from Jan 2021 - Sep 2022

Market trading sideways, waiting for technical indicators to be reached to add to positions

Thai producers Helixtap spoke to mention “a large top 4 producer buying up raw materials at +3 Baht/Kg higher than the average, with that producer leading the pack at 40.50THB/Kg”. This could imply them filling in orders they have sold previously, as Thai sellers were very active in the last 2 weeks filling Chinese orders and quiet this week as raw material prices creeped up.

Other Chinese traders we spoke to are “waiting for SHFE to reach 13,000 RMB/Kg levels so they can deliver (sell) on to the exchanges”. This week, domestic levels were about 10,800 - 11,000 RMB/Kg, a level which most Chinese traders would still prefer to be sidelined. 

On the Indonesian producers front, it is a far cry from Q1 2022 where they were at 1,800 USD/MT. Producers and dealers seem to be hitting any bid that comes their way for spot trades, of which February is the most active contract. A producer Helixtap spoke to said, “The market is broken - raw material is tight, and yet, we keep selling at a discount to futures.”
 

Otherwise, a trader source Helixtap spoke to highlighted that “if the China protests doesn’t move the market down, then maybe the worst is over”.

Plunging Chinese stock & higher raw mat prices support prices 

A steep drop in the Chinese stock level and some uptick in the raw material prices support Thai spot rubber prices during the Asian trade day. In addition, some strength in the Chinese yuan shifted the Chinese focus to the warehouse inventory. Meanwhile, clashing sentiments in China amid anti-government protests and China’s decision to lower the reverse repo rate last week have kept the market participants cautious. 

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1262.5/mt FOB Belawan/Surabaya, down US$2.5, and Standard Thailand Rubber (STR) 20 at US$1295/mt FOB Bangkok/Laem Chabang, and African Rubber (AFR) 10 at US$1290/mt CIF Rotterdam/Hamburg, both up US$7.5 on November 28, 2022.

While the actual demand fundamentals remained essentially unchanged, the spot market saw some upward movement triggered by the sentiments influenced by macroeconomic factors. Contrary to the traditional impact of protests in the market, rubber prices found some support. 

Even though there was some arbitrage buying happening in the market, the buyers were cautious around the ongoing protest in China and the continued spike in Covid cases. Interestingly, there was a significant inventory drawdown of 54% for SHFE rubber warehouses, indicating a possible increase in demand domestically rather than through imports. This was the result of the depreciation of the Chinese yuan against the US dollar. 

Meanwhile, higher raw material prices prompted the Thai producers to hold on to their offers, with continued reports of rains in south Thailand. As a result, offers for STR 20 ranged between US$1310- US$1350/mt FOB Bangkok/Laem Chabang for January to March shipments. 

The Indonesian market remained sluggish, but the anticipation in the market capped the fall in the prices. There were a few trades of SIR 20 reported in the range of US$1260- US$1265/mt FOB Belawan/Surabaya for December to February shipments.

The summary from our predictive forecasting this week:

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Rising covid cases in China overshadowed supply shortage

Supply tightness failed to support the market during the week as heavy weightage on Chinese sentiment coupled with fluctuation in the currencies against the US dollar widened the bid-offer gap. While the producers struggled through tightening margins, buyers were unwilling to book volumes despite low prices.  

The supply in the physical market was limited over the week due to raw material shortages in Indonesia and Thailand. However, with reports of wintering in Indonesia, raw material prices found some support, which was in Thailand as well, owing to continued rains. "Thailand is expecting further rainfalls this week, especially in the South. Hence the supply situation is expected to remain tight," a producer source said.

Meanwhile, some sellers opted to hold back based on the raw material prices. With offers for STR 20 ranging between US$1295- US$1330/mt FOB Bangkok/Laem Chabang for January shipments, some producers could not adjust. "I am not making margins at these levels after all the costs," said a Singapore-based source.

Helixtap assessed Thai raw at THB 37.5/kg, up THB 0.5, while Latex Bulk at US$ 960/mt FOB Bangkok/LCB, up US$10, over the week. Helixtap Indonesian raw material price was also up IDR 50 at IDR 18,350/kg over the week.

Meanwhile, the volatility in currency lent some breathing space for the producers. However, some market participants believe that the impact of currency on the demand side has started to fizzle out as the dollar has been strong for some time, so buyers have been hedging accordingly.

However, buyers were skeptical as a result of a wide bid and offer gap over the week. While some believe that the buying should happen as the prices are low, much would depend on the covid cases in China next week. "1 person has died in the last four months. So at some point in time, they will snap out of this. And currently, China is in deflation," said another producer source. Helixtap assessed Technically Specified Rubber (TSR) 20 at US$1310/mt CIF China, down US$ 30 over the week.

The price pullback was seen in the futures market amid the rising covid case in China, countering the previously over-bullish sentiment from China's reopening.

The bid and offer gap were narrower for Indo rubber than Thai rubber, indicating the sentiment of the sellers in the respective region. As a result, few trades of SIR 20 reported over the week in the range of US$1240- US$1265/mt FOB Belawan/Surabaya.

The market currently is largely sentiment-driven as the overall fundamentals are downcast. Therefore, the market expects more correction in the short-term period. However, this might impact the ongoing negotiations of long-term contracts as the buyers would want to pause and see the impact of the recent changes in the market.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 steady at US$1265/mt FOB Belawan/Surabaya, and Standard Thailand Rubber (STR) 20 at US$1287.5/mt FOB Bangkok/Laem Chabang, down US$2.5, and African Rubber (AFR) 10 at US$1282.5/mt CIF Rotterdam/Hamburg, down US$7.5 on November 25, 2022.

Spot prices mixed on bearish cues from Asia

Spot market remained mixed during the Asian trade day amid the bearish cues from Japan and China despite indicating a dovish stance from the Fed meeting; sources said Helixtap on Thursday.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1265/mt FOB Belawan/Surabaya, up US$5, Standard Thailand Rubber (STR) 20 at US$1290/mt FOB Bangkok/Laem Chabang and African Rubber (AFR) 10 at US$1290/mt CIF Rotterdam/Hamburg, both unchanged from November 23, 2022.

Some weakness in the Asian market coupled with appreciation in Asian currency against the US dollar kept the spot market activities muted during the day while the price remained mixed. Both buyers and sellers were holding on to their expectations bringing the market to a stalemate.

COVID cases continued to surge in China, with increased mobility restrictions and lockdowns, taking a toll on the economy and limiting buying interest. Furthermore, Japanese data released during the day showed a contraction in manufacturing activity at the fastest pace in two years in November. The Bank of Korea also raised its benchmark interest rates by 25 basis points hike to 3.25%.

The market indicators kept the buyers skeptical to book cargoes, anticipating more price correction. According to Helixtap's market intelligence, there was limited buying interest from China during the day.

However, the possibility of the Federal Reserve slowing its pace of interest rate hikes, coupled with hopes of the Chinese government to aid the real estate and financial sector and talks of China lowering the Reserve Requirement Ratio, capped the slide in the prices.

The bid and offer gap were narrower for Indo rubber than Thai rubber, indicating the sentiment of the sellers in the respective region. While the offer for January shipments of SIR 20 was at US$1270/mt FOB Belawan/Surabaya, buying interest was at US$1260/mt FOB Belawan/Surabaya. On the other hand, Thai producers held on to their offers amid continued rains in parts of Thailand. Offers for STR 20 were at US$1310- US$1320/mt FOB Bangkok/Laem Chabang, while the buying expectation was around US$1270- US$1280/mt FOB Bangkok/Laem Chabang.

Spot prices slide, more drop expected

Spot market slowed down during the Asian trade day with the market participants expecting more downside over the week amid anticipation around Fed rate hikes and rising covid cases in China; sources said Helixtap on Wednesday.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1260/mt FOB Belawan/Surabaya, down US$10, Standard Thailand Rubber (STR) 20 at US$1290/mt FOB Bangkok/Laem Chabang, down US$5, and African Rubber (AFR) 10 steady at US$1290/mt CIF Rotterdam/Hamburg, on November 23, 2022.

According to market intelligence, the market hike was triggered by positive cues from China upon the proposal of interest-free loans. However, global demand cues continue to remain bearish, which capped the prices rise. "It's (Price hike) more in response to China making interest-free loan," said a market source.

Some market participants feel the Chinese demand has to return soon as there have not been many reports of death lately, and the government would have to ease things as China is in deflation. However, Chinese authorities have imposed restrictions to check the rise in COVID-19, amplifying the worry amid the market that prices are for some more correction.

The traded level for January and February shipments of SIR 20 dropped to US$1260/mt FOB Belawan/Surabaya. Meanwhile, Thai producers held on to their offers amid a limited supply of raw materials. The reports of continued rains in parts of Thailand have propped up the raw material prices, as per the market source. Offers for STR 20 were at US$1310- US$1320/mt FOB Bangkok/Laem Chabang, while the buying expectation was around US$30/mt lower.

Meanwhile, there is some anticipation around the Fed's rate hike announcement due later in the day. The Fed has raised rates significantly over the year to curb inflation, and the market feels the Fed is closer to the end of the rate hiking cycle. "Fed expected to continue the hikes, but market expecting max 0.5%. Today's Fed minutes, if contrary, may cause prices to collapse," said the market source indicating more softening in the prices. 

Spot finds support on stronger currency; buyers resist

Rubber spot market gained on some technical rebound supported by stronger Asian currency and a tight supply of raw material; buyers resisted the hike stating weakness in the market fundamentals and rising covid cases in China; sources said Helixtap on Tuesday.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1270/mt FOB Belawan/Surabaya, up US$30, Standard Thailand Rubber (STR) 20 at US$1295/mt FOB Bangkok/Laem Chabang, up US$35, and African Rubber (AFR) 10 at US$1290/mt CIF Rotterdam/Hamburg, up US$10 on November 22, 2022.

The spot rubber market found some support during the day due to the technical rebound after a plunge in the spike in China’s covid cases the previous day. While it confused the market participants as the market fundamentals remained weak, the producers held on to their offers. The producers attributed the rise to some strength in the Asian currencies against the US dollar and some shortage in both Thai and Indo raw materials.

“Sellers have no urgency. Any bids can see but too low as it is hard to do based on the raw material prices,” said a Singapore-based source. As a result, a wide gap between the bids and offers led to muted market activities.

A trader source noted that trading activities from China remained muted due to the Covid cases spike. In addition, the market continued to worry about the reimposition of strict COVID curbs that could cause more disruptions in the market.

“The Covid situation in China is getting worse by the day. Guangzhao is in complete locked down. As a result, the physical market was very quiet, even though futures adjusted higher today,” said a producer source.

The offered level for February shipments of SIR 20 was at US$1285/mt FOB Belawan/Surabaya, while the buying interest was US$1255/mt on FOB basis. A similar sentiment was seen amid the Thai producers, with offers at US$1310/mt FOB Bangkok/Laem Chabang, while the buying expectation was around US$30/mt lower.

Spot rubber tumbles on sell-off in China after a spike in covid case. 

A massive sell-off in the market pulled the spot prices down during the Asian trade day as the spike in Covid cases in China coupled with a rise in stockpile in China compounded the worries of a global slowdown; sources said Helixtap on Tuesday.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1240/mt FOB Belawan/Surabaya, down US$45, Standard Thailand Rubber (STR) 20 at US$1260/mt FOB Bangkok/Laem Chabang, down US$50, and African Rubber (AFR) 10 at US$1280/mt CIF Rotterdam/Hamburg, down US$40 on November 21, 2022.

Coronavirus outbreaks across China have setback the hopes for an easing of restrictions leading to a lackluster opening for the rubber market. As a result, the prices saw a week-on-week drop of 2.5%-3.5% across the board during the day.

“Today selling is China Covid driven due to upticks in cases, death, and also a reversal in restrictions in places like Shijiazhuang,” said a Singapore-based source. The reversal in measures has sent jitters across the market, making both buyers and sellers cautious. 

The market currently is essentially sentiment driven as the overall fundamentals are downcast. Therefore, the market expects more correction in the short-term period. However, this might impact the ongoing negotiations of long-term contracts as the buyers would want to pause and see the impact of the recent changes in the market. 

“General sell-off in China commodities. There is a growing concern over the property market in China despite the Chinese government support,” said a trader source. The weakness in the property market has been a major market dampener, and the recent spike in covid cases added more pressure on the sentiments.

Moreover, weakness in the Asian currencies withered the buying capacity slowing the buyers down. The traded level for January shipments of SIR 20 dropped to US$1240/mt FOB Belawan/Surabaya during the day. Meanwhile, the Thai producers adjusted their offers to US$1270- US$1290/mt FOB Bangkok/Laem Chabang for December and January shipments.

The slide could also be a possible retreat after a spike in the prices last week, which according to some market participants, was a bit exaggerated. 

Meanwhile, there were reports of a fire in two rubber factories in Kedai Ledang Village, Kota Kisaran Timur District, Asahan. However, the impact was limited and likely to have a limited effect on the prices. 

The summary from our predictive forecasting this week:

To see more and compare physical and futures spread, click here.  Email any of our team members to understand our forecasting solution.

Spot prices find support from short covering & positive cues

The spot rubber market found some support from some short covering during the week, coupled with a series of unexpected positive moves in China and lower-than-expected consumer and wholesale inflation in the US.

As China relaxed some Covid restrictions to salvage the ailing economy, it triggered a price rally. There was some uptick in buying from China, pushing the prices up and lending some reprieve for the producers. In addition, some better-than-expected economic data has prompted some expectations amid the market participants that the central bank would have to slow its aggressive interest rate hikes.

The prop in the sentiment resulted in a rise of 1%-2% in the spot prices across the board. Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1285/mt FOB Belawan/Surabaya, up US$10 and Standard Thailand Rubber (STR) 20 at US$1310/mt FOB Bangkok/Laem Chabang, and African Rubber (AFR) 10 at US$1320/mt CIF Rotterdam/Hamburg, both up US$5 on November 18, 2022.

The traded level for February and March shipments of SIR 20 propped up to US$1285- US$1295/mt FOB Belawan/Surabaya during the day. Meanwhile, the Thai producers were seen holding on to their offers at US$1330/mt FOB Bangkok/Laem Chabang for January shipments. There was some buying interest for SMR as well.

Upbeat sentiment led to some short covering over the week. However, a spike in the Covid cases and rising SHFE stock could act as a deterrent in the coming week. Helixtap assessed Technically Specified Rubber (TSR) 20 at US$1340/mt CIF China, up US$ 20 over the week.

Meanwhile, Indonesian raw material supply remained tight, propping the prices up. On the Thai raw material, front producers welcomed limited demand in the market as the supply remained tepid amid rains.

“Market hasn’t changed much. Still very quiet and dormant. Rain still very much prevails in the South; hence not much supply is available. However, blessings in disguise as demand also remains very slow,” said a producer source. Helixtap assessed Thai raw at THB 37/kg, steady over the week, while Latex Bulk at US$ 950/mt FOB Bangkok/LCB, up US$25, over the week. However, Helixtap Indonesian raw material price was up IDR 550 at IDR 18,300/kg over the week.

Indo rubber diverted to China as arbitrage window widens

The widening spread between Thai and Indo rubber has reopened the arbitrage economics between Indonesia and China. As a result, despite the limited movement of Indonesian rubber into the Chinese market traditionally, a few delayed cargoes have been diverted to China, leading to a 13% rise in exports in September 2022 compared to August. 

There is some arbitrage window for delivery in the Shanghai futures exchange. As a result, some producers diverted their delayed shipments to China to maintain cash flow. According to Helixtap market intelligence, the trend indicates a potential resurgence of Indonesian rubber demand, which has been struggling with demand uncertainties and huge margin pressure. 

“A lot of SIR going to China,” said a trader source. Another market source added that the diverted, delayed cargoes are either exchange delivery or for forward buying. The sellers might want to capitalize on some of their cargoes afloat at a lower than market level price rather than bear the costs.

As per the market sources, producers with some presence in Singapore has the arbitrage factor working for them as the freight is relatively less from Singapore to China than from Indonesia to China. However, other producers struggling with volume might follow the trend irrespective of the frieght factor to maintain the cash flow. 

According to Helixtap data, imports from Indonesia picked up in the last two months.

Source: Helixtap & Customs data 

A widening Thai-Indo spread has reopened the arbitrage window between the two regions. The average gap between the SIR 20 and STR 20 dropped to around US$23/mt which averaged at US$17.5/mt in October. The spread has been consistently in the negative territory since mid-September after reaching as high as US$125/mt in May 2022. 

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1275/mt FOB Belawan/Surabaya and Standard Thailand Rubber (STR) 20 at US$1305/mt FOB Bangkok/Laem Chabang both unchanged from November 16, 2022.

Source: Helixtap 

Given the continued bearish demand cues across the globe, some companies might be motivated to finalize volume on their books before the year's end by selling volumes into China and closing their current physical positions.

Uncertainties persist in China 

Meanwhile, premature to say that China will reclaim the status of a prime buyer for Indonesian rubber given the tough competition from Africa, which to has been off-loading its volumes into China amid bearish demand from the western market.

Most sellers likely staying afloat and waiting for the tire demand or for the long-term contract negotiations to kick in. Due to inflationary pressure and rising geo-political tension, tepid demand from major buying countries, including Europe and US, has weighed on the Indonesian rubber prices directing the arbitrage flow.

In addition, rising COVID-19 cases in China weighed on sentiment despite the hopes raised by easing restrictions this week. Furthermore, sluggish import demand in India owing to oversupply in the domestic market has also been a trigger. Many cargoes from Indonesia have been redirected to India instead of China in the past, owing to cheaper freight rates.

According to Helixtap data, a similar trend was seen in August 2021. However, the flow was limited to a few cargoes.

Source: Helixtap

Moreover, amid the disgruntled situation in Europe, there was some buying interest for African rubber in China, with offers for AFR 10 at around US$ 1315-1320/mt on CIF basis. “It is difficult for the moment (African rubber to Europe) as the Euro vs. USD exchange rate is wreaking the market increase for the African producers being paid in euro,” said a market source earlier this week. Helixtap assessed African Rubber (AFR) 10 steady at US$1315/mt CIF Rotterdam/Hamburg, on November 17, 2022.

Rising geo-political tension & Chinese Covid cases halt price rally

The surge in covid cases in China and escalation in the Ukraine war as Russian missiles killed two people in Poland rattled the market by muting the activities during the Asian trade day, capping any further rise in the prices; sources said Helixtap on Wednesday.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1275/mt FOB Belawan/Surabaya, down US$7.5, Standard Thailand Rubber (STR) 20 at US$1305/mt FOB Bangkok/Laem Chabang, and African Rubber (AFR) 10 at US$1315/mt CIF Rotterdam/Hamburg, both down US$10 on November 16, 2022.

As expected, the spot prices moved southbound amid muted demand and the absence of some of the major buyers in the market. In addition, rising COVID-19 cases in China weighed on sentiment despite the hopes raised by easing restrictions this week. “China was active yesterday,” said a Singapore-based source adding the buyers were possibly trying to make the most of the arbitrage in the market.

The market participants deemed the market quiet. As a result, the traded level for January shipments of SIR 20 dropped to US$1275- US$1280/mt FOB Belawan/Surabaya during the day. Thai producers, too, were seen adjusting their offers to US$1320/mt FOB Bangkok/Laem Chabang for December shipments.

However, amid the disgruntled situation in Europe, there was some buying interest for African rubber in China, with offers for AFR 10 at around US$ 1315-1320/mt on CIF basis. “It is difficult for the moment (African rubber to Europe) as the Euro vs. USD exchange rate is wreaking the market increase for the African producers being paid in euro,” said a market source.

To weigh the market further down, oil prices too remained downcast owing to rising cases of Covid in China. Hence, the buyers were cautious amid the negative cues from the market and opted to slow down. Meanwhile, fears of an escalation in the Ukraine war, too, sent jitters across the market.

Chinese aid supports spot prices, Indo raw material supply tight

Speculation continued to play the market upward during the Asian trade day amid some positive news from China to support the yuan. While the Thai rubber prices steadied over the day, Indonesian prices remained firm on raw material shortage; sources said Helixtap on Tuesday.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1282.5/mt FOB Belawan/Surabaya, up US$12.5, Standard Thailand Rubber (STR) 20 at US$1315/mt FOB Bangkok/Laem Chabang, and African Rubber (AFR) 10 at US$1325/mt CIF Rotterdam/Hamburg, both up US$5 on November 15, 2022.

The market found some support as the Chinese central bank kept the interest rate unchanged for the third consecutive month to support the yuan against the US dollar. Even though there are reports of some relaxation in the Covid restrictions, the mounting pressure amid a fresh wave of COVID outbreaks might lead to further loss of momentum. However, according to Helixtap market intelligence, the finished goods stock in China is healthy. “Seems like everyone is looking forward to Q2 2023 (demand for tires),” said a market source.

The Thai producers were seen holding on to their offers at US$1330/mt FOB Bangkok/Laem Chabang for December and January shipments with the buying interest ay US$1300/mt on FOB basis. “Market looks more speculative on the news than strong in trades,” said a trader source.

There was some strength in the futures market, which made the market skeptical of the way forward as activities in the physical market were sporadic. The sentiments remained muted as the market awaits the development of the G20 summit starting today.

Meanwhile, Indonesian rubber continued to see some activities being the most economical option and further supported by the shortage of raw materials. As a result, the traded level for December to February shipments of SIR 20 propped up to US$1280- US$1290/mt FOB Belawan/Surabaya during the day.

The gap between the Indonesian and Thai rubber has dropped to negative US$32.5 from negative US$15 earlier in November. The margins, however, are under pressure for the Indonesian producers, especially amid the volatility in the market.

However, a continuous shortage might lead to a spike in the inflow of African raw materials into the Indonesian market, as seen in March 2022. There was some rise in imports of African raw materials in August. However, it had a limited impact on an already southbound market then. The average cost of import for African raw materials in August 2022 was around US$1047/mt, while Indonesian raw material prices averaged US$1460/mt.

Spot price rally continues; dip expected later in the week 

Spot rubber market continued last week’s rally as the market sentiment gained confidence in China’s announcement of aid for the property sector. However, some producers opted to stay out of the market, trying to limit the risk from the speculation-triggered rise in the prices; sources said Helixtap on Monday. 

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1270/mt FOB Belawan/Surabaya, up US$10, Standard Thailand Rubber (STR) 20 at US$1310/mt FOB Bangkok/Laem Chabang, up US$ 20, and African Rubber (AFR) 10 at US$1320/mt CIF Rotterdam/Hamburg, up US$ 10 on November 14, 2022.

The price rally in the spot market continued on Monday amid borrowed optimism from China’s announcement to aid the property sector. “Positivity continued from last week. The market found bullish news on China,” said a Singapore-based source. 

While the optimism was good for the prices, the core fundamentals were still weak, which kept the market participants cautious. However, some improvement in buying prices was seen as traded level for January and February shipments of SIR 20 propped up to US$1270- US$1275/mt FOB Belawan/Surabaya during the day. Thai producers, too, raised their offers to US$1330- US$1340/mt FOB Bangkok/Laem Chabang for December and January shipments.

The current uptick in the prices is primarily driven by speculation, thus, unlikely to sustain. The volatility in the current market is further underscored by the correction in the oil prices dragged down by a firmer U.S. dollar and record high coronavirus cases in major Chinese cities.

While, during the day, the weakness in the Asian currency against the U.S. dollar supported the prices, the spot market is likely to slide down over the week amid a spike in covid cases in China. Some producers, as a result, opted to stay out of the market to insulate themselves from the volatility. Most market participants noted that there were few producers in the market. The situation was slightly more critical for the Indonesian producers amid reports of some raw material shortages. “Indonesian producers are not making money now heard lack of raw materials again,” said another Singapore-based source.

The summary from our predictive forecasting this week:

To see more and compare physical and futures spread, click here. Email any of our team members to understand our forecasting solution.

Volatility continues in spot prices, uncertainty around China worries market

The spot prices closed the week on some ease in Chinese covid restrictions and a drop in US inflation. However, the market is uncertain of the way forward as the week was choppy amid the speculations around the sustainability of the rebound and fickle buying from China.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1260/mt FOB Belawan/Surabaya, up US$10, Standard Thailand Rubber (STR) 20 at US$1290/mt FOB Bangkok/Laem Chabang, up US$ 20, and African Rubber (AFR) 10 at US$1310/mt CIF Rotterdam/Hamburg, up US$ 10 on November 11, 2022.

China has announced a reduction in quarantine time and removed some restrictions on international flights, indicating its easing stance on the zero-Covid policy. “Market seems positive with China easing covid entry news,” said a Singapore-based trader.

With increased Chinese activities during the day, prices all across the board found some support. The traded level for January and February shipments of SIR 20 propped up to US$1260- US$1265/mt FOB Belawan/Surabaya during the day. Meanwhile, the Thai producers were seen adjusting offers raising it to US$1320/mt FOB Bangkok/Laem Chabang for December shipments.

Helixtap assessed Technically Specified Rubber (TSR) 20 at US$1320/mt CIF China, up US$ 70 over the week, the highest intra-week hike since March 2022.

In addition, better-than-expected US inflation data also supported the market sentiment. The latest US consumer price index climbed 0.4%, bringing the annual rate down to 7.7% from 8.2% in September. This lent some support to the Asian currencies against the US dollar, increasing the buying capacity for the dollar-traded rubber. However, easing inflation is unlikely to waver Fed from further tightening, which would impact the liquidity and demand in the market.

As a result, some market participants are still uncertain of the sustainability of these levels amid overall weaker demand cues. Meanwhile, projections of high energy costs in Q4 2022 would also impact the tire makers weighing on their demand.

Raw material northbound

Raw material prices remained northbound over the week despite the demand being bearish. “Rubber and latex market is largely unchanged. Although we are hearing about China easing its Covid policies, demand remains low, and so are the prices,” said a producer source. With continued rains in the southern region of Thailand, the prices found some support but limited demand capped the rise. 
 

Helixtap assessed Thai raw at THB 37/kg, up THB 2, and Latex Bulk at US$ 925/mt FOB Bangkok/LCB, up US$75, over the week. Helixtap Indonesian raw material price, too, was up IDR 250 at IDR 17,750/kg over the week.

Spot prices dive, buyers cautious  

The market sentiment took a dive during the Asian trade day as the buyers were cautious muting the market activities; sources said Helixtap on Thursday. 

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1250/mt FOB Belawan/Surabaya, down US$10, Standard Thailand Rubber (STR) 20 at US$1270/mt FOB Bangkok/Laem Chabang, down US$ 15, and African Rubber (AFR) 10 steady at US$1300/mt CIF Rotterdam/Hamburg, on November 10, 2022.

The weakness in Chinese demand spilled over into the markets. The crash in the crypto market worsened the sentiment. Even though there are expectations that the Fed might slow down its rate hikes from December, rates are also expected to peak at higher levels.

While the weakness in Asian currencies against the US dollar should have lent some support. However, the diminishing buying capacity capped any up in the market. Moreover, a the drop in oil prices added to the bearishness in the market. 

The market environment is likely to remain unfavorable amid the slowdown in the tire demand amid the economic slowdown and inflationary pressure. As a result, rubber prices are likely to continue the southbound movement. 

The buying interest for February shipments of SIR 20 dropped to US$1245/mt FOB Belawan/Surabaya during the day, with sellers largely sidelined. Meanwhile, the Thai producers were seen adjusting offers and, correcting them to US$1290/mt FOB Bangkok/Laem Chabang for December shipments.

Market loses steam, Chinese buying withering 

With limited interest in Indonesian rubber from China, Indonesian rubber failed to keep up the momentum during the Asian trade day, making the Indonesian producers skeptical of the outlook and the return of the southbound movement, sources said Helixtap on Wednesday. 

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1260/mt FOB Belawan/Surabaya, down US$2.5, Standard Thailand Rubber (STR) 20 at US$1285/mt FOB Bangkok/Laem Chabang, up US$ 5, and African Rubber (AFR) 10 steady at US$1300/mt CIF Rotterdam/Hamburg, on November 09, 2022.

Indonesian rubber was the first to break the upward movement in the market amid limited interest from China. The producers seemed a bit shaky and concerned about the possible return of the southbound direction in the market. “Rubber market continues to be tough,” said a Singapore-based source. 

With the continued strain on the margins and sales, the Indonesian market might see some more shutdowns of the factories and consolidation. As a result, the traded level for January/February shipments of SIR 20 dropped to US$1255- US$1265/mt FOB Belawan/Surabaya during the day.

STR 20 prices, however, continued to hold firm, banking on the Chinese demand to continue even though the signals might indicate otherwise. According to Helixtap market intelligence, there was a spike in buying from China from the dealers earlier in the day, which fizzled out later. Furthermore, the weakness in Yuan against the US dollar also dented the Chinese buying capacity.

The traded level for STR 20 mixture into China also dropped to US$1320/mt CIF China. However, offers for STR 20 for December cargoes were marginally up at US$1300-US$1310/mt FOB Bangkok/Laem Chabang.

Renewed stress on a continued zero covid stance earlier this week has sparked worries among the market participants. Furthermore, the drop in China’s October annualized producer prices for the first time since December 2020 dented the market confidence. Meanwhile, the market awaits US mid-term election results and the inflation data. The buyers continued to remain cautious.

Chinese continued to support prices

The spurt in Chinese buying continued to support the spot prices during the Asian trade day as some believed this buying could be a part of the restocking for Chinese New Year; sources said Helixtap on Tuesday.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1262.5/mt FOB Belawan/Surabaya, up US$22.5, Standard Thailand Rubber (STR) 20 at US$1280/mt FOB Bangkok/Laem Chabang, up US$ 20, and African Rubber (AFR) 10 at US$1300/mt CIF Rotterdam/Hamburg, up US$ 20 on November 08, 2022.

Continued buying from China over the week kept the prices firm. According to Helixtap market intelligence, there is active buying on the dealer’s end. Given the recent appreciation of the Yuan against the U.S. dollar, there is some rebound in the Chinese buying capacity. The traded level for STR 20 mixture into China increased to US$1340/mt CIF China.

Moreover, with the Chinese New Year earlier in 2023, this buying could be a part of the restocking activities. Furthermore, the prices were at two years low, which could have also prompted the buying. “China buying up...note that CNY is pretty early for 2023,” said a Singapore-based source.

Meanwhile, despite Indonesian rubber still being the most economical option, it failed to find its market in China. The traded level for January/February shipments of SIR 20 soared to US$1260- US$1265/mt FOB Belawan/Surabaya during the day. In addition, the Bank of Japan’s decision to keep the interest rates unchanged also supported the buying interest from Japanese buyers.

The western market demand remained sluggish ahead of the midterm elections and key inflation data on deck. According to some Africa-based sources, there is little demand from the western markets, despite the market moving upwards.

Meanwhile, the market fundamentals are still bearish amid a contraction in Chinese exports and imports in October as China grappled with COVID-19 curbs coupled with the expectation that the U.S. consumer price index might indicate higher inflation. “With such macro fundamentals, I am doubtful the uptick would sustain,” said the Singapore-based source.

Spot gains, Chinese traders short as China re-enforces zero-Covid pledge

The spot market gained driven by an upswing in the sentiment, while some Chinese traders shorted their positions during the Asian trade day as China re-enforced its zero- Covid pledge; sources said Helixtap on Monday. 

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1240/mt FOB Belawan/Surabaya, up US$15, Standard Thailand Rubber (STR) 20 at US$1260/mt FOB Bangkok/Laem Chabang, up US$ 20, and African Rubber (AFR) 10 at US$1280/mt CIF Rotterdam/Hamburg, up US$45 on November 07, 2022.

The upswing in the market continued, lending spot rubber a strong opening for the week. The uptick was largely triggered by the speculation about China “conditional” relaxing its stringent Covid policy. As a result, prices all across the board rose 6-8% in November. 

However, the reality is a bit different as some Chinese traders short their positions anticipating a drop in the market as Chinese health officials renewed their stance of zero-Covid strategy coupled with some strength in the Yuan against the U.S. dollar. As a result, the market is likely to dampen even though the prices were northbound. “Market is choppy, news-driven, all eyes on China now,” said a Singapore-based source. 

With Indonesian rubber still being the most economical amid the basket, SIR 20 will likely continue its uptick over the week. The traded level for January/February shipments of SIR 20 soared to US$1240- US$1245/mt FOB Belawan/Surabaya during the day, up around 1.2% since November 04, 2022.

The buyers are skeptical, but according to Helixtap market intelligence, there was some pick up in the Chinese buying last week, driving the market today. “China has been quite active in buying in the upswing last week,” a trader source noted. The traded level for STR 20 mixture into China hovered between US$1290-US$1310/mt CIF China.

Meanwhile, some of the African producers were covering for raw materials despite some uptick in the African raw material prices. With a limited appetite for risk, both U.S. and European markets have slowed down. The market is still assessing mixed U.S. jobs report amid talks of the White House privately encouraging Ukraine to negotiate with Russia.

The summary from our predictive forecasting this week:

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Buying frenzy amid price rally

Spot market rally continued amid some buying frenzy as the Chinese buying returned post reports of some relaxation of China’s covid restrictions supported by some gains in Yuan against the US dollar. As a result, the prices over the week saw a rise of 4.7-6% across the board.

According to Helixtap market intelligence, there was some panic buying in the market with the return of the Chinese buying, which pushed the market over the week. “China market giving back some of the earlier climbs,” said a Singapore-based source.

The buying from China picked up later in the week, largely arbitrage buying. The large drawdown in SHFE stockpile, which according to market sources, are old stocks consumed in the physical market, typically in November. While this worked last week amidst the weaker Yuan and high Thai raw material prices, this week Yuan appreciated amid the dovish stance of the Fed. Helixtap assessed Technically Specified Rubber (TSR) 20 at US$1390/mt CIF China, up US$ 80 over the week.

Meanwhile, the supply of Thai raw materials also eased over the week due to improved weather conditions in the South of Thailand. However, producers noted that the weather in the South of Thailand is expected to improve for the next few days. “But rain will probably return soon as it’s rainy season in Southern Thailand,” said a producer source. As a result, Helixtap assessed Thai raw at THB 38.5/kg, up THB 1, while Latex Bulk at US$ 1010/mt FOB Bangkok/LCB, up US$50, over the week. As a result, the Thai sellers raised the offers.

However, the raw material situation is way tighter for the Indonesian market owing to wintering. The supply tightness coupled with some uptick in buying, Indonesian raw material prices found some support. The producers noted the raw material prices are “fricking high”. Helixtap Indonesian raw material price was also up IDR 1150 at IDR 19,500/kg over the week.

The Indonesian rubber prices, too, saw support. However, the gap between Thai and Indonesian rubber continued to be negative making Indonesian rubber the most economical option. There were a few trades of SIR 20 reported in the range of US$1315- US$1335/mt FOB Belawan/Surabaya.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1325/mt FOB Belawan/Surabaya, up US$20 and Standard Thailand Rubber (STR) 20 at US$1365/mt FOB Bangkok/Laem Chabang, up US$25, and African Rubber (AFR) 10 at US$1350/mt CIF Rotterdam/Hamburg, up US$20 on December 02, 2022.

Rising covid cases in China overshadowed supply shortage

Supply tightness failed to support the market during the week as heavy weightage on Chinese sentiment coupled with fluctuation in the currencies against the US dollar widened the bid-offer gap. While the producers struggled through tightening margins, buyers were unwilling to book volumes despite low prices.  

The supply in the physical market was limited over the week due to raw material shortages in Indonesia and Thailand. However, with reports of wintering in Indonesia, raw material prices found some support, which was in Thailand as well, owing to continued rains. "Thailand is expecting further rainfalls this week, especially in the South. Hence the supply situation is expected to remain tight," a producer source said.

Meanwhile, some sellers opted to hold back based on the raw material prices. With offers for STR 20 ranging between US$1295- US$1330/mt FOB Bangkok/Laem Chabang for January shipments, some producers could not adjust. "I am not making margins at these levels after all the costs," said a Singapore-based source.

Helixtap assessed Thai raw at THB 37.5/kg, up THB 0.5, while Latex Bulk at US$ 960/mt FOB Bangkok/LCB, up US$10, over the week. Helixtap Indonesian raw material price was also up IDR 50 at IDR 18,350/kg over the week.

Meanwhile, the volatility in currency lent some breathing space for the producers. However, some market participants believe that the impact of currency on the demand side has started to fizzle out as the dollar has been strong for some time, so buyers have been hedging accordingly.

However, buyers were skeptical as a result of a wide bid and offer gap over the week. While some believe that the buying should happen as the prices are low, much would depend on the covid cases in China next week. "1 person has died in the last four months. So at some point in time, they will snap out of this. And currently, China is in deflation," said another producer source. Helixtap assessed Technically Specified Rubber (TSR) 20 at US$1310/mt CIF China, down US$ 30 over the week.

The price pullback was seen in the futures market amid the rising covid case in China, countering the previously over-bullish sentiment from China's reopening.

The bid and offer gap were narrower for Indo rubber than Thai rubber, indicating the sentiment of the sellers in the respective region. As a result, few trades of SIR 20 reported over the week in the range of US$1240- US$1265/mt FOB Belawan/Surabaya.

The market currently is largely sentiment-driven as the overall fundamentals are downcast. Therefore, the market expects more correction in the short-term period. However, this might impact the ongoing negotiations of long-term contracts as the buyers would want to pause and see the impact of the recent changes in the market.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 steady at US$1265/mt FOB Belawan/Surabaya, and Standard Thailand Rubber (STR) 20 at US$1287.5/mt FOB Bangkok/Laem Chabang, down US$2.5, and African Rubber (AFR) 10 at US$1282.5/mt CIF Rotterdam/Hamburg, down US$7.5 on November 25, 2022.

Spot prices find support from short covering & positive cues

The spot rubber market found some support from some short covering during the week, coupled with a series of unexpected positive moves in China and lower-than-expected consumer and wholesale inflation in the US.

As China relaxed some Covid restrictions to salvage the ailing economy, it triggered a price rally. There was some uptick in buying from China, pushing the prices up and lending some reprieve for the producers. In addition, some better-than-expected economic data has prompted some expectations amid the market participants that the central bank would have to slow its aggressive interest rate hikes.

The prop in the sentiment resulted in a rise of 1%-2% in the spot prices across the board. Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1285/mt FOB Belawan/Surabaya, up US$10 and Standard Thailand Rubber (STR) 20 at US$1310/mt FOB Bangkok/Laem Chabang, and African Rubber (AFR) 10 at US$1320/mt CIF Rotterdam/Hamburg, both up US$5 on November 18, 2022.

The traded level for February and March shipments of SIR 20 propped up to US$1285- US$1295/mt FOB Belawan/Surabaya during the day. Meanwhile, the Thai producers were seen holding on to their offers at US$1330/mt FOB Bangkok/Laem Chabang for January shipments. There was some buying interest for SMR as well.

Upbeat sentiment led to some short covering over the week. However, a spike in the Covid cases and rising SHFE stock could act as a deterrent in the coming week. Helixtap assessed Technically Specified Rubber (TSR) 20 at US$1340/mt CIF China, up US$ 20 over the week.

Meanwhile, Indonesian raw material supply remained tight, propping the prices up. On the Thai raw material, front producers welcomed limited demand in the market as the supply remained tepid amid rains.

“Market hasn’t changed much. Still very quiet and dormant. Rain still very much prevails in the South; hence not much supply is available. However, blessings in disguise as demand also remains very slow,” said a producer source. Helixtap assessed Thai raw at THB 37/kg, steady over the week, while Latex Bulk at US$ 950/mt FOB Bangkok/LCB, up US$25, over the week. However, Helixtap Indonesian raw material price was up IDR 550 at IDR 18,300/kg over the week.

Volatility continues in spot prices, uncertainty around China worries market

The spot prices closed the week on some ease in Chinese covid restrictions and a drop in US inflation. However, the market is uncertain of the way forward as the week was choppy amid the speculations around the sustainability of the rebound and fickle buying from China.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1260/mt FOB Belawan/Surabaya, up US$10, Standard Thailand Rubber (STR) 20 at US$1290/mt FOB Bangkok/Laem Chabang, up US$ 20, and African Rubber (AFR) 10 at US$1310/mt CIF Rotterdam/Hamburg, up US$ 10 on November 11, 2022.

China has announced a reduction in quarantine time and removed some restrictions on international flights, indicating its easing stance on the zero-Covid policy. “Market seems positive with China easing covid entry news,” said a Singapore-based trader.

With increased Chinese activities during the day, prices all across the board found some support. The traded level for January and February shipments of SIR 20 propped up to US$1260- US$1265/mt FOB Belawan/Surabaya during the day. Meanwhile, the Thai producers were seen adjusting offers raising it to US$1320/mt FOB Bangkok/Laem Chabang for December shipments.

Helixtap assessed Technically Specified Rubber (TSR) 20 at US$1320/mt CIF China, up US$ 70 over the week, the highest intra-week hike since March 2022.

In addition, better-than-expected US inflation data also supported the market sentiment. The latest US consumer price index climbed 0.4%, bringing the annual rate down to 7.7% from 8.2% in September. This lent some support to the Asian currencies against the US dollar, increasing the buying capacity for the dollar-traded rubber. However, easing inflation is unlikely to waver Fed from further tightening, which would impact the liquidity and demand in the market.

As a result, some market participants are still uncertain of the sustainability of these levels amid overall weaker demand cues. Meanwhile, projections of high energy costs in Q4 2022 would also impact the tire makers weighing on their demand.

Raw material northbound

Raw material prices remained northbound over the week despite the demand being bearish. “Rubber and latex market is largely unchanged. Although we are hearing about China easing its Covid policies, demand remains low, and so are the prices,” said a producer source. With continued rains in the southern region of Thailand, the prices found some support but limited demand capped the rise. 
 

Helixtap assessed Thai raw at THB 37/kg, up THB 2, and Latex Bulk at US$ 925/mt FOB Bangkok/LCB, up US$75, over the week. Helixtap Indonesian raw material price, too, was up IDR 250 at IDR 17,750/kg over the week.

Buying frenzy amid price rally

Spot market rally continued amid some buying frenzy as the Chinese buying returned post reports of some relaxation of China’s covid restrictions supported by some gains in Yuan against the US dollar. As a result, the prices over the week saw a rise of 4.7-6% across the board.

According to Helixtap market intelligence, there was some panic buying in the market with the return of the Chinese buying, which pushed the market over the week. “China market giving back some of the earlier climbs,” said a Singapore-based source.

The buying from China picked up later in the week, largely arbitrage buying. The large drawdown in SHFE stockpile, which according to market sources, are old stocks consumed in the physical market, typically in November. While this worked last week amidst the weaker Yuan and high Thai raw material prices, this week Yuan appreciated amid the dovish stance of the Fed. Helixtap assessed Technically Specified Rubber (TSR) 20 at US$1390/mt CIF China, up US$ 80 over the week.

Meanwhile, the supply of Thai raw materials also eased over the week due to improved weather conditions in the South of Thailand. However, producers noted that the weather in the South of Thailand is expected to improve for the next few days. “But rain will probably return soon as it’s rainy season in Southern Thailand,” said a producer source. As a result, Helixtap assessed Thai raw at THB 38.5/kg, up THB 1, while Latex Bulk at US$ 1010/mt FOB Bangkok/LCB, up US$50, over the week. As a result, the Thai sellers raised the offers.

However, the raw material situation is way tighter for the Indonesian market owing to wintering. The supply tightness coupled with some uptick in buying, Indonesian raw material prices found some support. The producers noted the raw material prices are “fricking high”. Helixtap Indonesian raw material price was also up IDR 1150 at IDR 19,500/kg over the week.

The Indonesian rubber prices, too, saw support. However, the gap between Thai and Indonesian rubber continued to be negative making Indonesian rubber the most economical option. There were a few trades of SIR 20 reported in the range of US$1315- US$1335/mt FOB Belawan/Surabaya.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1325/mt FOB Belawan/Surabaya, up US$20 and Standard Thailand Rubber (STR) 20 at US$1365/mt FOB Bangkok/Laem Chabang, up US$25, and African Rubber (AFR) 10 at US$1350/mt CIF Rotterdam/Hamburg, up US$20 on December 02, 2022.

Rising covid cases in China overshadowed supply shortage

Supply tightness failed to support the market during the week as heavy weightage on Chinese sentiment coupled with fluctuation in the currencies against the US dollar widened the bid-offer gap. While the producers struggled through tightening margins, buyers were unwilling to book volumes despite low prices.  

The supply in the physical market was limited over the week due to raw material shortages in Indonesia and Thailand. However, with reports of wintering in Indonesia, raw material prices found some support, which was in Thailand as well, owing to continued rains. "Thailand is expecting further rainfalls this week, especially in the South. Hence the supply situation is expected to remain tight," a producer source said.

Meanwhile, some sellers opted to hold back based on the raw material prices. With offers for STR 20 ranging between US$1295- US$1330/mt FOB Bangkok/Laem Chabang for January shipments, some producers could not adjust. "I am not making margins at these levels after all the costs," said a Singapore-based source.

Helixtap assessed Thai raw at THB 37.5/kg, up THB 0.5, while Latex Bulk at US$ 960/mt FOB Bangkok/LCB, up US$10, over the week. Helixtap Indonesian raw material price was also up IDR 50 at IDR 18,350/kg over the week.

Meanwhile, the volatility in currency lent some breathing space for the producers. However, some market participants believe that the impact of currency on the demand side has started to fizzle out as the dollar has been strong for some time, so buyers have been hedging accordingly.

However, buyers were skeptical as a result of a wide bid and offer gap over the week. While some believe that the buying should happen as the prices are low, much would depend on the covid cases in China next week. "1 person has died in the last four months. So at some point in time, they will snap out of this. And currently, China is in deflation," said another producer source. Helixtap assessed Technically Specified Rubber (TSR) 20 at US$1310/mt CIF China, down US$ 30 over the week.

The price pullback was seen in the futures market amid the rising covid case in China, countering the previously over-bullish sentiment from China's reopening.

The bid and offer gap were narrower for Indo rubber than Thai rubber, indicating the sentiment of the sellers in the respective region. As a result, few trades of SIR 20 reported over the week in the range of US$1240- US$1265/mt FOB Belawan/Surabaya.

The market currently is largely sentiment-driven as the overall fundamentals are downcast. Therefore, the market expects more correction in the short-term period. However, this might impact the ongoing negotiations of long-term contracts as the buyers would want to pause and see the impact of the recent changes in the market.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 steady at US$1265/mt FOB Belawan/Surabaya, and Standard Thailand Rubber (STR) 20 at US$1287.5/mt FOB Bangkok/Laem Chabang, down US$2.5, and African Rubber (AFR) 10 at US$1282.5/mt CIF Rotterdam/Hamburg, down US$7.5 on November 25, 2022.

Spot prices find support from short covering & positive cues

The spot rubber market found some support from some short covering during the week, coupled with a series of unexpected positive moves in China and lower-than-expected consumer and wholesale inflation in the US.

As China relaxed some Covid restrictions to salvage the ailing economy, it triggered a price rally. There was some uptick in buying from China, pushing the prices up and lending some reprieve for the producers. In addition, some better-than-expected economic data has prompted some expectations amid the market participants that the central bank would have to slow its aggressive interest rate hikes.

The prop in the sentiment resulted in a rise of 1%-2% in the spot prices across the board. Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1285/mt FOB Belawan/Surabaya, up US$10 and Standard Thailand Rubber (STR) 20 at US$1310/mt FOB Bangkok/Laem Chabang, and African Rubber (AFR) 10 at US$1320/mt CIF Rotterdam/Hamburg, both up US$5 on November 18, 2022.

The traded level for February and March shipments of SIR 20 propped up to US$1285- US$1295/mt FOB Belawan/Surabaya during the day. Meanwhile, the Thai producers were seen holding on to their offers at US$1330/mt FOB Bangkok/Laem Chabang for January shipments. There was some buying interest for SMR as well.

Upbeat sentiment led to some short covering over the week. However, a spike in the Covid cases and rising SHFE stock could act as a deterrent in the coming week. Helixtap assessed Technically Specified Rubber (TSR) 20 at US$1340/mt CIF China, up US$ 20 over the week.

Meanwhile, Indonesian raw material supply remained tight, propping the prices up. On the Thai raw material, front producers welcomed limited demand in the market as the supply remained tepid amid rains.

“Market hasn’t changed much. Still very quiet and dormant. Rain still very much prevails in the South; hence not much supply is available. However, blessings in disguise as demand also remains very slow,” said a producer source. Helixtap assessed Thai raw at THB 37/kg, steady over the week, while Latex Bulk at US$ 950/mt FOB Bangkok/LCB, up US$25, over the week. However, Helixtap Indonesian raw material price was up IDR 550 at IDR 18,300/kg over the week.

Volatility continues in spot prices, uncertainty around China worries market

The spot prices closed the week on some ease in Chinese covid restrictions and a drop in US inflation. However, the market is uncertain of the way forward as the week was choppy amid the speculations around the sustainability of the rebound and fickle buying from China.

Helixtap assessed Standard Indonesia Rubber (SIR) 20 at US$1260/mt FOB Belawan/Surabaya, up US$10, Standard Thailand Rubber (STR) 20 at US$1290/mt FOB Bangkok/Laem Chabang, up US$ 20, and African Rubber (AFR) 10 at US$1310/mt CIF Rotterdam/Hamburg, up US$ 10 on November 11, 2022.

China has announced a reduction in quarantine time and removed some restrictions on international flights, indicating its easing stance on the zero-Covid policy. “Market seems positive with China easing covid entry news,” said a Singapore-based trader.

With increased Chinese activities during the day, prices all across the board found some support. The traded level for January and February shipments of SIR 20 propped up to US$1260- US$1265/mt FOB Belawan/Surabaya during the day. Meanwhile, the Thai producers were seen adjusting offers raising it to US$1320/mt FOB Bangkok/Laem Chabang for December shipments.

Helixtap assessed Technically Specified Rubber (TSR) 20 at US$1320/mt CIF China, up US$ 70 over the week, the highest intra-week hike since March 2022.

In addition, better-than-expected US inflation data also supported the market sentiment. The latest US consumer price index climbed 0.4%, bringing the annual rate down to 7.7% from 8.2% in September. This lent some support to the Asian currencies against the US dollar, increasing the buying capacity for the dollar-traded rubber. However, easing inflation is unlikely to waver Fed from further tightening, which would impact the liquidity and demand in the market.

As a result, some market participants are still uncertain of the sustainability of these levels amid overall weaker demand cues. Meanwhile, projections of high energy costs in Q4 2022 would also impact the tire makers weighing on their demand.

Raw material northbound

Raw material prices remained northbound over the week despite the demand being bearish. “Rubber and latex market is largely unchanged. Although we are hearing about China easing its Covid policies, demand remains low, and so are the prices,” said a producer source. With continued rains in the southern region of Thailand, the prices found some support but limited demand capped the rise. 
 

Helixtap assessed Thai raw at THB 37/kg, up THB 2, and Latex Bulk at US$ 925/mt FOB Bangkok/LCB, up US$75, over the week. Helixtap Indonesian raw material price, too, was up IDR 250 at IDR 17,750/kg over the week.