Natural rubber futures traded on the Shanghai, SICOM and Osaka exchanges made noticeable gains when trading opened in the morning today (May 17, Tuesday) (Please see the above table). Is this recovery a short-term trend or the the beginning of a long-term major rally? Have natural rubber markets already come out from their unfavorable conditions? Let me share my perceptions.

At least four factors are supporting natural rubber prices today:

1. Authorities announced that the lockdowns in the Shanghai City will be lifted in stages starting from June 1. This is a relieving news as China represents 42% of the global demand for natural rubber and Shanghai is the country’s commercial capital.
2. In a remark made by the U.S. Fed Reserve Chairman, the Fed is unlikely to go for a rate hike beyond 0.5 percentage point in the June FOMC meeting. This has allied the fear of aggressive interest rate hikes.
3. The U.S. dollar softened against its rival currencies after its recent gains that took the dollar index to a 20-year high.
4. Natural rubber supply from Thailand is partly interrupted due to the rains affecting harvesting.

However, manufacturing activities world over remain impacted by the prolonged supply-chain uncertainty, long shipping delay, escalated shipping cost, over-heated inflation, high raw material prices, economic repercussions of the Russian invasion in Ukraine and the massive sanctions announced on Russia. It means that the demand prospects of natural rubber remain seriously impacted.

In short, market fundamental does not support a strong recovery in the prices until the demand sector returns to normalcy. The prices can improve driven by the set of positive developments mentioned above. But, the gains will be limited.