China’s Output Naturally Disrupts, Rubber Prices Continue Strengthening

Rubber prices in the Tokyo commodity exchange continued to strengthen in late trading today, Thursday (05/16/2019).

Based on Bloomberg data, rubber prices for the most active contract in October 2019 at the Tokyo Commodity Exchange (Tocom) closed up 0.21 percent or 0.4 points to 193.50 yen per kilogram (kg).

Previously, rubber prices opened in the green zone with a gain of 0.31 percent or 0.8 points to as low as 193.90 yen per kg. As for trading on Wednesday (15/5), rubber prices closed surging 3.82 percent or 7.1 points to the level of 193.10.

On the other hand, rubber prices at the Shanghai Futures Exchange for the most active contract in September 2019 also closed up 3.65 percent or 425 points to 12,070 yuan per ton, after opening a rebound with a gain of 1.33 percent or 155 points to 11,800 yuan per tonne .

In Tuesday’s trade, Shanghai rubber prices closed down 0.68 percent or 80 points to 11,645 yuan per ton.

Reported by Bloomberg, rubber prices surged on speculation that the largest rubber producer in China suspended production on all of its plantations, raising concerns about widespread supply disruptions.

“The market topix is that China’s domestic production will decline because the Yunnan Natural Rubber Industry Group issued an announcement yesterday that it stopped tapping on its plantations due to drought,” said Jia Zheng, portfolio manager at Shanghai Minghong Investment Co., as quoted by Bloomberg.

The largest plantation in China, Jiangcheng Rubber which is under Yunnan Natural stopped conducting tapping on Monday because hot temperatures worsened work conditions and triggered the danger of pests.

China is a large natural rubber producer with an output of around 800,000 tons in 2016, but the amount of imports is far bigger than domestic production. Disruptions in local supply could lead to an increase in China’s natural rubber imports.