The supply-demand fundamentals and non-fundamental factors will remain unfavourable to the natural rubber market in the short term, according to analysts in the rubber sector.
The market is waiting for a ceasefire between Russia and Ukraine and the lifting of the Covid lockdown in China.
Jom Jacob, an independent analyst in the global natural rubber industry, said the continuing war and the massive economic sanctions have aggravated the chaos in the chip semiconductor manufacturing industry and has put a brake on the global EV revolution. These developments have a direct bearing on the global demand for natural rubber because of the dominant dependence of natural rubber on the auto sector.
Likewise, the stringent lockdowns in Shanghai are damaging the manufacturing and business activities in China. These developments are crucial for the global demand for natural rubber because the country represents around 43 per cent of the global NR demand.
Besides, manufacturing activities world over are impacted by the rising inflation, soaring raw material prices, escalating shipping cost and growing volatilities and uncertainties.
Supply chain disrupted
The Russia-Ukraine conflict and the massive sanctions announced on Russia have worsened the disarray in global supply chain logistics, shipping delay and global trade.
However, the supply of natural rubber globally is set to increase in the short term as farmers in major producing countries are expected to resume tapping following the end of the winter season. A section of farmers have reopened their rubber holdings for harvesting and market arrivals have started improving in the case of a few countries. Farmers are expected to resume tapping in Muslim dominated south Thailand, Indonesia and Malaysia following the end of the fasting month.
KN Raghavan, Executive Director, Rubber Board, said the global situation is a bit sketchy at present due to the ongoing war and Covid shutdowns in China. It is expected that China will get back to peak manufacturing activity levels before too long. Only a very sustained and prolonged close down can create a situation of surplus supply over demand in international market.
“We expect production to be good this year. The demand is high, prices are good and there is a buoyancy in the sector. Rain guarding activity is in full swing and we expect more area to be rain-guarded this year. Prophylactic spraying against diseases have also been completed”, he told BusinessLine.