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The Association of Natural Rubber Producing Countries predicts sustained momentum in natural rubber (NR) prices in the short-term following tight global supplies, improving demand and the resultant deficit.
The deficit is likely to widen beyond initial projections in view of supply disruptions caused by rains and floods during October and November, says ANRPC's Rubber Market Intelligence Report.
The demand outlook is subject to the risk associated with the potential resurgence of Covid-19 during the winter. The short-term outlook on prices is also challenged by the potential strengthening of the dollar and likely absence of support from the crude oil market.
According to the report, global supply is expected to remain tight in the short-term, due largely to the loss of tapping days and other forms of disruptions resulting from extreme weather conditions prevailing across Asia. The extended rainy season, torrential depression rains, and the floods being experienced in the major rubber growing regions across Asia are likely to bring global supply down.
As the impact of torrential rains and floods on rubber supply is yet to be estimated by ANRPC, they are not reflected in the production data of October and November reported by Thailand, Indonesia, India, Malaysia, and Sri Lanka.
It implies that world production is likely to undergo a downward revision once the impact of the recent depression rains and floods are ascertained by the respective countries.
Global production this year is expected to be short of consumption by 192,000 tonnes (world production 13.836 million tonnes and consumption 14.028 million tonnes). In view of the damage caused by the extreme weather, the production in 2021 would be lower than the estimate reported at the end of October. More specifically, the mismatch between global production and consumption in 2021 would be much wider than 192,000 tonnes.
Besides, the fresh initiatives taken by the US and China to improve trade and diplomatic ties and the virtual meeting of the two leaders have significantly contributed to investor confidence and increased risk appetite in equities and commodity futures, the report said.
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