Will Rubber Market Keep the Rising Trend This Year?

09 May 2017 | Source from China Rubber Journal

After continuous downturn for the past few years, the rubber material market finally revived in 2016. The price of NR rose from about RMB 10,000 Yuan (per ton, similarly hereinafter) at the beginning of 2016 to RMB 20,000 Yuan at the end of the year, which moved ahead with fluctuation all over the year. In 2017, the rubber material market still keeps a strong rising tendency. Though the end of January witnessed the Chinese Spring Festival, the NR market also had a good performance in January, and the price rose by 25% approximately; in addition, the NR futures on the Tokyo Commodity Exchange also rose by 26%. Well, will the price of rubber keep rising in 2017?

It is said that there are three reasons favorable for the NR market at present in the industry. Firstly, Thailand, the biggest main producing country of NR, went through 2 continuous large-scale rainfalls from December 2016 to early January 2017, causing flood to many provinces, thus affecting the output of NR in January and it is predicted that the output of NR will also be affected in the whole year; secondly; the NR trees of the rubber production countries in Southeast Asia enter the deciduous period from February to March; thirdly, the price of NR and SR inverses at present, and the price of SR is thousands of Yuan higher than that of NR. Therefore, tire enterprises with a large demand for rubber will surely choose NR as a replacement and increase the demand for NR.

It is learnt that butadiene rubber had an eye-catching performance among SR in 2016. In January, its price was low to RMB 8,000 Yuan. However, it rebounded to more than RMB 20,000 Yuan in December. In January 2017, butadiene rubber kept the rising trend of last year and its price rose by 23.34%.

It is analyzed that the national policy about overload control in August 2016 drives the sharp rise of replacement tires of heavy trucks, which is one of the reasons of the booming rubber material market. Since the promulgation of this policy, the sales volume of domestic heavy trucks has recovered obviously. In January 2017, the sales volume of heavy trucks reached 82,000, which increased by 9% on a month-on-month basis with the year-on-year increase of 122%, hitting a new historical height during the past 6 years. The sharp increase of sales volume of heavy trucks drives the recovery of the all-steel tire market, thus driving the consumption growth of NR.

Rubber trade enterprises hold an optimistic attitude towards the rubber market in the first half of this year. However, in their opinion, there are many uncertain reasons in the second half of this year. Shen Wei, the general manager of Shanghai Hujulian Industry Co., Ltd., is optimistic about the rubber market in the first quarter and thinks that the Thai government will sell the NR stock on February 14 and in March, and the Chinese government has the wish of exchanging NR stocks recently, which will cause some influence to the rubber market. Li Zhihe, the general manager of R1 International Trading (Shanghai) Co., Ltd., thinks that the rubber market should firmly develop upward in the first half year, and the price of NR is predicted to fluctuate around RMB 18,000 Yuan~RMB 23,000 Yuan. 

As truck and passenger car tires are the biggest users of NR, the United States International Trade Commission will make the final “anti-dumping and countervailing” judgment against Chinese truck and passenger car tires on February 22. Therefore, the result will cause great uncertainty to the market effect. On January 24, 2017, the United States Department of Commerce released the final result of “anti-dumping and countervailing” judgment against Chinese truck and passenger car tires, in which the anti-dumping duty rate is 9% and 22.57%, and the countervailing duty rate is 38.61%~65.46%. If this result is established, the export of Chinese truck and passenger car tires to the US will be blocked.

In addition, in the industry, because of the driving force caused by the demand of auto for the tire industry in the first half year, the rubber material market is still very strong and merchants are full of confidence. With supply shortage of NR in the market, the merchants are reluctant to sell out. However, the market support is relatively poor in the second half year. The main reasons are listed as follows: Firstly, the auto market was booming in 2006 beyond the expectation and the production and sale respectively increased by 14.5% and 13.7%, while the predicated growth of the auto market will be about 5% in 2017; secondly, the orders of heavy trucks in 2016 will be mainly released in the first half year of 2017. Even so, rubber merchants are still hold an optimistic attitude towards the replacement market of truck and passenger car tires. 

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