Commodities

Global rubber to get a vaccine boost

V Sajeev Kumar Kochi | Updated on January 11, 2021

Rebound in Chinese economy, weaker dollar to lift prices of natural rubber

The roll-out plans of Covid-19 vaccine by governments across countries are expected to generate positive sentiments in the global natural rubber market and can uplift the demand outlook in the short-term.

Offtake may rise

The US economy can make substantial recovery from the $900-billion virus relief spending package that would likely stay positive in the natural rubber market, says the Rubber Market Intelligence Report prepared by the Association of Natural Rubber Producing Countries. The world consumption of natural rubber is expected to present an improved performance and is anticipated to increase by 4 per cent against a preliminarily estimated 1.6 per cent decrease in November 2020.

Moreover, the world consumption is anticipated to recover in 2021 by posting 4.9 per cent against 6.9 per cent decline expected in 2020, the report said.

In China — which accounts for around 40 per cent of the global NR consumption — the industrial production increased by 7 per cent in November, faster than 6.9 per cent attained in October.

According to the market report, the consistently increasing momentum exhibited by China’s manufacturing sector can contribute to positive sentiment in commodities including that of natural rubber.

Production drop likely

The world rubber production is anticipated to decline by 10 per cent during December largely due to fungal diseases that have affected more than 0.6 million hectares of mature trees over the past one and a half years. It is estimated that the yield from the affected trees will remain low for about two years.

Due to the annual wintering of trees, the world supply is expected to enter into a phase of seasonal low by the second half of January.

The US dollar is anticipated to stay weak against a basket of currencies at least for a few months because the US government is expected to continue delivery of more monetary and fiscal stimulus. Commodities including natural rubber often gain from a weak dollar, the report said.

Natural rubber can gain from the crude oil market which is anticipated to rise in the short term, it added.

Published on January 11, 2021

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