‘Vietnam is currently ranked 3rd in the world in terms of natural rubber production with 7.7% of global natural rubber production and 5.6% of the total global rubber plantation area. According to the Ministry of Agriculture and Rural Development, in 2019, the total area of rubber cultivation in Vietnam reached 946,200 hectares with a production of 1,173 thousand tons. The Southeast leads in rubber plantation area with 56.9% of the total rubber plantation area of the country. The quality of Vietnamese rubber in the past year reached high quality. 100% of HA (High Ammoniac) and LA (Low Ammoniac) rubber products qualified TCVN 6314:2013 standards.’
Vietnam’s export of natural rubber spiked up while the domestic rubber market was unstable
Vietnam’s export of natural rubber spiked up
According to the Ministry of Agriculture and Rural Development, the total volume of rubber exports in the first 4 months of 2021 reached 486 thousand tons and 817 million USD, up 79.6% in volume and 111.6% in value compared to the same period of 2020. China, the United States and India were the three largest import markets with market shares of 64.2%, 5.1% and 2.7% respectively. The average export price of rubber also increased significantly. In the first three months of 2021, it reached 1,660 USD/ton, up 14.1% over the same period in 2020.
In the first 4 months of 2021, mixed-rubber (HS: 400280) was the most exported product. It accounted for 60.89% of the country’s total rubber exports, with 285.09 thousand tons. Mixed-rubber exports worth 459.18 million USD, up 87.1% in amount and 116.3% in value over the same period in 2020. Exports to China accounted for 99.53% of Vietnam’s total exports. Most of the other types of rubber also achieved good growth compared to the same period in 2020.
China was the largest import market of Vietnam’s rubber market with 64.2% of the export market share. China government has increased rubber imports from many countries, including Vietnam. It was the result of the post-Covid-19 economic recovery policy and the impact of extreme weather on rubber growing areas, leading to a lack of domestic supply. This policy has spiked up the price of rubber in the world market.
Rubber price at some Exchanges
At the Shanghai Commodity Futures Exchange (SHFE), rubber prices are volatile. Prices tend to drop significantly in the middle of May 2021. On May 28, 2021, the price of RSS3 rubber for June delivery term at 13,365 yuan/ton (equivalent to US$1.78/kg), down 2.9% compared to the end of April 2021, but up 33.6% compared to the same period in 2020.
The price of rubber for delivery in June 2021 at SHFE in May 2021
Source: shfe.com.cn, VIRAC
At the Osaka Commodity Exchange (OSE) Japan, rubber prices have tended to decrease in recent sessions. But compared to the end of April 2021, prices still increased. On May 28, 2021, the price of RSS3 rubber for the June delivery term traded at 256.8 yen/kg (equivalent to $2.34/kg), an increase of 6.3% compared to the end of April 2021 and an increase of 86.1% compared to the same period in 2020.
Price movements of RSS3 for June delivery in June 2021 at Osaka exchange in May 2021
Source: cf.market-info.jp, VIRAC
In Thailand, prices tend to increase sharply. On May 28, 2021, RSS3 price at 71.6 Baht/kg (equivalent to USD 2.29/kg), an increase of 8.5% compared to the end of April 2021 and 64.2% over the same period last year.
RSS3 price movement in Thailand in May 2021 (Unit: Baht/kg)
Source: thainr.com, VIRAC
The domestic rubber market was unstable
However, in May 2021, the domestic price constantly fluctuated. It made Vietnam Rubber companies have to adjust the price to fit the market. Currently, the purchasing price of the latex of Phu Rieng Rubber One Member Limited Liability Company is 380 VND/TSC; the buying price of mixed latex at 290 VND/TSC. Loc Ninh Rubber One Member Company Limited also announced the adjustment of the purchase price of smallholder rubber latex 6 times during the month. Dong Nai Rubber One Member Limited Liability Company also announced the adjustment of the specific purchase price of rubber 3 times in May:
Purchase price of rubber latex of Dong Nai Rubber One Member Co., Ltd
Source: Dong Nai Rubber One Member Co., Ltd, VIRAC
What has led to the current market situation?
Demand for rubber increase significantly, especially in China
China is the biggest factor affecting the rubber market this year. In order to cope with the shortage of domestic supply that has been severely affected by the effects of extreme weather patterns and implement economic recovery policies, China has increased the purchase of high-quality latex. According to the Chinese Customs Office, in the first four months of 2021, China’s natural rubber imports (HS code 4001) reached 493.33 million USD, up 44.1% over the same period in 2020. Vietnam is the 5th largest natural rubber exporter for China with 82.26 million USD, up 140.9% over the same period in 2020. Vietnam’s natural rubber market share accounted for 6.76% of China’s total import value, up from 4.04% of the first 4 months of 2020.
The world industries are recovering
The automobile industry has also contributed to making the rubber market more exciting. Automobile manufacturing in Vietnam grew by 17.7% over the same period last year. In China, according to data from the China Association of Automobile Manufacturers (CAAM), total market sales reached 2.53 million units in March, up 74.9% compared to the same period last year. Car sales in March were the 12th consecutive month of increase. This is the clearest sign that the car manufacturing industry in China is having a strong post-Covid-19 recovery. The automobile manufacturing industry in Europe and the US is also starting to show signs of recovery.
The rubber demanded to produce rubber gloves also believed to be a major factor for the high demand for rubber. Global demand for rubber gloves has experienced a record increase in history, increasing from 380 billion units to 420 billion units due to the Covid-19 pandemic. Thailand’s rubber glove exports were constantly increasing, adding 154.9% in September 2020 compared to the same period in 2019, bringing total exports in the first 9 months of 2020 up 61.4%. The Malaysian Rubber Glove Manufacturers Association (MARGMA) predicts that the global shortage of rubber gloves will continue until the first quarter of 2022.
The supply of rubber in the main exporting countries is decreasing
The second factor believed to have a strong impact on the rubber market was the scarcity of supply. The impacts of Covid-19 have made many countries faced human resources problems. Not only that, protests in Thailand or a coup in Myanmar have also caused rubber supply to stall. These countries did not have enough workers to harvest and transport rubber. In the first 4 months of 2021, Thailand exported 510.8 thousand tons of synthetic rubber (HS code 4002), worth 25.53 billion baht (equivalent to 818.22 million USD), down 21% in output and down 11.6% in value over the same period of 2020. India, the second-largest rubber consumer and the sixth-largest rubber producer in the world, is facing stagnation due to the Covid-19 solution.
Market Prediction for the rest of the year
The demand of the World
The International Monetary Fund (IMF) raised its forecast for global growth to 6% in 2021, from 5.5% previously. This was due to a better outlook for the US economy following the $1.9 trillion bailout. Experts predict that in the medium-term period from 2021-2024, the world rubber price will probably enter a new price increase cycle. This cycle is probably created because the rubber supply is decreasing while the world’s demand is increasing.
Thai rubber producer Sri Trang (SET) forecasts global natural rubber demand in 2021 will be at least 13.4 million tons, up 7% compared to 2020. This prediction largely due to increased purchases by China to provide the materials for the automobile industry. According to the International Rubber Research Organization (IRSG), the world demand for natural rubber in 2021 will recover thanks to the growth of the commercial vehicle segment, mainly in the emerging countries’ markets.
Supply of the world
Supply may be disrupted due to weather factors. The quantity of rubber in major exporting countries in the world such as Thailand, Indonesia, Vietnam and Malaysia may decrease as winter begins. Rubber trees will begin to lose their leaves and produce a lower quantity of latch. On the other hand, the global rubber supply is affected due to the shortage of shipping containers returning due to port closures and labor shortages, along with China’s stockpiling increase and the COVID-19 epidemic causes big impact to some countries that are the main rubber suppliers also affect the output of rubber supplied to the market.