Commerzbank called time on the drop in rubber futures, terming “excessive” a near-halving in prices of the tyre ingredient from early-2017 highs, given robust car industry demand and potential measures to sap supplies.
The bank viewed an “unexpectedly good supply situation” as behind a drop in rubber prices which on Tokyo stood at 187.30 yen a kilogramme on Monday, well below a high of 366.70 yen a kilogramme reached in February.
Commerzbank flagged “higher stocks and therefore lower imports in China – by far the biggest consumer” of rubber, and the top importer, besides a “shift in sentiment on the market, with fears about demand predominating”.
Concerns have been fuelled by factors such as China’s credit ratings downgrade, besides by the weakened hopes for US growth as President Donald Trump’s political agenda has hit turbulence.
In Shanghai, rubber futures last week hit 12,215 yuan a tonne, the lowest for a best-traded contract on data going back to August 2005, and half the contract’s high four months ago.
‘Price slide seems excessive’
However, “the price slide seems excessive”, Commerzbank said, saying that while China’s car industry has entered a less upbeat phase, “China’s automotive economy is not experiencing such a dramatic slowdown as had been widely feared”.
Data on Monday showed Chinese car sales falling year on year in May for a second month, the first time that two successive month of decline have been reported since 2015.
But the May drop was by a minimal 0.1%, to 2.1m vehicles, the China Association of Automobile Manufacturers.
Commerzbank noted that in Japan, “19.1m vehicle tyres were sold in the first five months of the year, which is 7.2% more than in the same period last year”.
‘Prices to recover’
Furthermore, the bank flagged talk that leading rubber procuring nations Thailand, Malaysia and Indonesia are mulling plans to “for stabilising the rubber price, eg via export restrictions”, curbs which have precedent in the industry.
“And last but not least, the much-regarded exchange stocks in Shanghai have risen no further of late,” Commerzbank said.
“We therefore expect natural rubber prices to recover in the next few months.”
