Natural rubber (NR) prices have risen by 10–15% across major physical and futures markets in Southeast Asia from late August to mid-October. The accompanying data shows the percentage increases of various NR grades across key markets.
Typically, the period from mid-September to mid-January marks the global peak production season for natural rubber, when abundant supply usually exerts downward pressure on prices. Surprisingly, this year, global output has shown no signs of seasonal increase, even by mid-October.
Sharp Production Declines in Major Producing Countries
Several factors are contributing to reduced output—particularly in Thailand, the world’s largest producer and exporter of natural rubber. Since the start of this year’s tapping season, Thai production has declined by over 10% month-on-monthcompared to the same period last year. Persistent rainfall across major rubber-growing regions has severely disrupted tapping activities, while changing rainfall patterns continue to impact yields.
Additionally, productivity has been hurt by the widespread outbreak of the Pestalotiopsis leaf fall disease, which has affected roughly 150,000 hectares of traditional rubber-growing areas over the past four years.
Abnormal heatwaves and prolonged periods of hot weather have also further reduced latex output. Overall, Thailand’s natural rubber production in 2023 is expected to fall by 6.0%. Meanwhile, Indonesia—the world’s second-largest NR producer—is forecasted to see a 13.0% decline in 2023, following a 13.2% decrease in 2022. In Malaysia, production is expected to drop by 10.4% this year.
Although factors differ by country, the collective supply contraction across Southeast Asia is offsetting weaker demand, particularly from China, the United States, and Europe.
Speculative Buying Drives Price Recovery
The recent rebound in rubber prices has been largely driven by speculative trading on the Shanghai Futures Exchange. Investors are anticipating large-scale investments from state-backed Chinese funds as part of government initiatives to stabilize domestic capital markets.
China’s September trade report (released on October 13) signaled a gradual stabilization of the world’s second-largest economy and the largest NR consumer, boosting investor sentiment.
Possible Global Shortage in Early 2024
Historically, the peak production season from mid-September to mid-January generates a global surplus of 1.2–1.5 million tons of NR, which helps manufacturers meet demand during the low-production season (February–June) when tapping halts and yields drop.
If this year’s peak season fails to produce a typical surplus, the industry could face a severe NR shortage early next year (2024). Monitoring production trends in Thailand and Indonesia—the two largest producers—and the global surplus level by the end of January will be critical to forecasting supply stability.