The Association of Natural Rubber Producing Countries (ANRPC) has released its latest market trends report, Natural Rubber Trends & Statistics June 2020, which says that the key factor behind the abnormal fall in the prices of natural rubber (NR) since mid-January is the huge drop in world demand caused by the Covid-19 pandemic.
The world consumption of NR dropped by 15.7% during H1 2020 (Jan-Jun 2020) as per the ANRPC’s revised estimates. In China, the country accounting for 40% of the world demand, consumption fell by 20.1% during H1 2020.
However, the association noted that the worst is almost over as far as world consumption of NR is concerned, which is now set to enter positive territory, increasing 1.4% year-on-year during Q3 2020 (Jul-Sep). Consumption in China, in particular, is expected to increase by 0.8%, year-on-year during the same quarter.
The report says that even though the International Monetary Fund has further scaled back the global economic outlook for 2020, to -4.9% growth from -3.0% projected in April, the consumption sector of NR has almost returned to normal with the exception of a few countries. On the supply side, Covid-19 has removed nearly one million metric tons of potential supply of NR from the world market.
The ANRPC expects market sentiment to be triggered by other favorable economic developments including the impressive performance of China’s manufacturing sector in June, measured in terms of the Purchasing Managers’ Index (PMI) and the U-turn taken by China’s auto sales, which rose 14.5% in May after a 4.4% rise in April and 43.0% fall in March. Trends in crude oil market also remain favorable to NR.
The organization also cautioned that, while conditions have finally turned favorable for the NR market to gain strength and return to pre-pandemic levels, it is important to account for associated risks as well. These include the concern over the possibility of a second wave of Covid-19, delays in implementing effective stimulus policies by governments, and increasing geopolitical conflicts, which the ANRPC said can hinder the above favorable factors translating into positive market sentiment.