Adverse weather boosts rubber prices to 13-year high

SINGAPORE – Excessive monsoon rains following a drought in the world’s top rubber producer Thailand and typhoon damage in No. 5 grower China are reducing output of the tyre-making material, dragging down production prospects and lifting prices to 13-year highs.
The output of natural rubber, which is largely produced in Asia, is forecast to fall by up to 4.5% in 2024 to around 14 million metric tonnes, estimates from four analysts and traders show.
Expectations of lower output have driven up prices of rubber more than 50% this year, making it one of the top-performing commodities in 2024. The benchmark Osaka contract hit a 13-year high of 419.7 yen (US$2.81) last week.
Prices of physical rubber have risen in tandem with futures markets, with Thailand’s benchmark export-grade block rubber climbing more than 31% since the start of the year, according to data from Helixtap Technologies.
Rubber crops usually undergo a wintering season of low production from February to May, before a peak harvesting period that lasts until September.
However, scorching temperatures of around 40 degrees Celsius (104 degrees Fahrenheit) in the first quarter may have led to a prolonged wintering season, as rubber trees can experience stunted growth in extremely hot conditions, said Farah Miller, founder of rubber-focused data firm Helixtap in Singapore.
The heatwave was followed by heavy rains and flooding in rubber producing regions in Thailand in recent months.
“These fluctuations can drastically impact the tapping frequency of rubber trees and overall latex production,” Miller said.
As a result, output in Thailand, which accounts for about one-third of global production, is expected to decline by 10% to 15%, according to Helixtap.
With this year’s peak harvest season disrupted by an unusually excessive number of rainy days and floods, rubber crops may have been damaged by leaf diseases, said Jom Jacob, chief analyst at Indian analysis firm WhatNext Rubber.
He estimated global rubber production in 2024 would likely fall short of consumption by 1.2 million metric tonnes.
China hit
Typhoon Yagi, Asia’s most powerful storm this year, worsened the supply strain, tearing through the major Chinese producing region of Hainan and damaging 16,000 hectares of rubber trees, or 2.1% of China’s total rubber area, according to WhatNext Rubber estimates.
This year’s reduced rubber output may be felt well into 2025, said Vijeth Shetty, senior vice president and global head of rubber at Olam Agri, as producers normally build inventories in the second half of the year before peak demand season begins the next year.
However, that comes against the backdrop of subdued demand in top consumer China amid slowing economic growth, although financial stimulus measures have raised hopes of improved demand.