China’s full lifting of COVID lockdowns is one of the prerequisites for a major recovery in natural rubber prices. Bringing hopes of the same, the Chengdu City of China lifted the COVID-19 lockdowns yesterday (Sept 15), subject to continuation of movement restrictions. The Chengdu City was under lockdown since Sept. 1.
It is increasingly hoped that China would review its zero-Covid policy and potentially end all the major restrictions. The 20th Party Congress of the Chinese Communist Party (CCP), beginning from Oct. 16, is expected to take key policy decision on the country’s economic, social and political leadership agenda for the future. The WHO is meeting next week to consider formally declaring the end of the pandemic. If China also decides to lift its major restrictions, it can potentially raise the demand prospects for NR from within the country as well as globally. China’s potential move over the next few weeks would be crucial in setting the tone of natural rubber market globally.
Even if China lifts all the major COVID restriction, its potential impact on the global demand prospects for NR would be limited. The emerging global economic trends suggest that the demand sector could take longer time to return to normal growth track. Through a formal statement yesterday (Sept 15), the IMF shared the view that global economic slowdown has only intensified in the recent weeks and months. A further loss of global economic momentum is expected in the quarter ending September due to continued high inflation, supply-chain disruption, and tight financial market condition. Although the IMF didn’t comment on the revised outlook or growth rates, it is almost sure that it would scale down its earlier forecasts for this year and the next year through the World Economic Outlook (WEO) to be released in October. A further trimming of the world economic outlook implies that the global demand prospects for NR would be lower than previously projected.
Let us stay tuned with China’s decisions and the IMF’s next release of the World Economic Outlook.
In rubber futures, traders are moving cautiously and largely staying on the sidelines ahead of the U.S. Federal Reserve’s FOMC (Federal Open Market Committee) meeting to be held on 20 and 21 September. The dollar is gaining further strength as it is almost sure that the Fed would be taking a further aggressive stance to curb the soaring inflation by policy tightening and hiking the rates by at least by 75-basis-points.
A combination of positive and negative factors is influencing the natural market sentiment. On the Shanghai Futures Exchange, the most active contracts (Jan 2023 expiration) closed today’s (Sept 16, Friday) daytime trading at 12,970 yuan per ton (Up 45 yuan or 0.3%). The market settled today at 12,985 yuan (Up 60 yuan or 0.5%). Please see below the chart showing today’s price trends.
Today’s (Sept 16, Friday) closing and settlement prices of natural rubber futures traded on SICOM, JPX Osaka and SHFE are shown below:
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