Overview
Japanese rubber futures have shown a modest rebound, marking a second consecutive session of gains. This comes amid ongoing supply disruptions that are countering concerns about weaker demand.
Market Movements
Osaka May contract rose by 0.7 yen, or 0.19%, reaching 373.6 yen ($2.43) per kg. This rise is attributed to supply constraints primarily influenced by adverse weather conditions in major producing regions.
SHFE May contract eased by 25 yuan, or 0.14%, settling at 18,440 yuan ($2,531.12) per metric ton. High raw material prices continue to support rubber prices, although sluggish downstream demand pressures the market.
SICOM january contract last traded at 198.9 U.S. cents per kg, reflecting a slight decrease of 0.2%.
Supply Concerns
Significant supply disruptions have been reported:
China’s Yunnan Region: Harvesting has ceased.
Hainan: Production is being gradually reduced.
Southern Thailand: Recovery in output is slow due to ongoing rainfall.
These factors contribute to a tightening global supply situation, raising concerns about future availability.
Demand Dynamics
Despite the supportive supply cuts, demand remains a concern. Recent data shows mixed performance in China’s economy, with industrial output growth slightly accelerating while retail sales have disappointed. This ongoing weakness in domestic consumption is prompting the Chinese government to enhance fiscal support and social security measures heading into 2025.
Currency and Economic Context
The yen was marginally weaker at 154.17 per U.S. dollar, continuing a trend of seven consecutive sessions of decline. A weaker yen typically makes yen-denominated assets more attractive to foreign buyers, though the rising U.S. dollar complicates this dynamic.
Conclusion
The rubber market is navigating a complex landscape influenced by supply chain vulnerabilities, particularly in Thailand, and mixed economic signals from China. As weather-related disruptions continue to pose risks, market participants are closely monitoring developments, especially the upcoming Federal Reserve meeting, which could further impact commodity prices and economic stability.
Outlook
The interplay between these factors suggests a cautious outlook for the rubber market as it heads into the new year.
