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According to Hidde Smit – a consultant and analyst of Rubber Forecasts – natural rubber (NR) prices will be going up during the next two quarters of 2017 before commodity surplus weighs in on the market again. Price increase will occur due to severe winter season in Thailand as well as reduction in tapping activities. In his speech during the Tire Technology Expo in Hannover, Germany held this February, Mr. Smit pointed out that tapping intensities in rubber-producing countries went down predominantly due to decreased prices since 2013 (below USD 2.00) as well as severe floods in Thailand – the biggest natural rubber producing country – the beginning of the year.

Industry officials in India told Reuters that natural rubber output is expected to increase 15 percent during 2017-2018. This is expected to be the highest price in almost 4 years. Also, higher prices make farmers commence using trees abandoned before. Notwithstanding, natural rubber price rally appears to be bad news for tire manufacturers as it cuts down profits. And to stay afloat, the businesses may pass those hits on to customers.

The Association of Natural Rubber Producing Countries (ANRPC) claims that the growth was driven by the recovery in crude oil prices, mid-term supply concerns, new expectations of a faster-paced global economic recovery led by the U.S. All these factors improve outlook for natural rubber demand. According to a statement from ANRPC the crude oil price recovery impact was caused by OPEC’s deal on the 30th of November 2016, which stipulates cut in output by 1.2 million barrels per day during the 1st half of 2017.

By mid-May all price-gains made earlier in the second quarter in the Natural Rubber markets, have been completely diminished. Since then some significant hikes have been recorded in Thailand, Japan, China and Malaysia. However, in overall markets are still far behind the peaks reached in April, which suggests that the attempt by the producer-country to rebalance the market is losing strength.