The NR prices slumped once again in September. The NR futures price at the SHFE kept dropping after the short-term price increase in early September. The highest price and the lowest price at the SHFE were RMB 17,840/mt on September 6 and RMB 14,330/mt on September 22 respectively.

SCI holds that four reasons led to the price slump. First, the industrial products saw price downtrend recently, affecting the NR prices. Second, the ITRC members reached no consensus on rubber export limitation, and bullish expectations were impacted. Third, the NR market faced oversupply, and NR import volume decreased for four consecutive months. Fourth, there were many arbitrage transactions before. With the price decrease, players gained profit. The market will still face oversupply.

With this background, SCI holds that there are 3 aspects players should pay attention to.

1. The inventory at the Qingdao Bonded Zone may increase in October.

By mid-September, the inventory at the Qingdao Bonded Zone dropped to 187kt, down 8.02% from end-August, mainly dragged down by NR inventory decrease. Recently, SCI learnt that the inventory pressure at the bonded zone eased somewhat, and the ex-warehouse volume increased greatly. The rubber import volume increased in August-September, and the inventory at the bonded zone was not high. SCI believes that the inventory may increase greatly in H2, October.

2. The Kunming warehouses were almost full.

The inventories at the Kunming warehouses hit a record high recently. According to statistics, the inventories of spot rubber were over 100kt, up nearly 20% from early September and up over 30% from H1 of August. The resources were mainly from arbitrage orders. The inventories out of the Qingdao Bonded Zone were also high.

3. The downstream users mainly purchased according to the actual rigid demand.

The NR price rebounded from June, but it recovered slowly. It slumped in mid-September. Thus, players lacked confidence about the future prices. According to SCI’s sources from some tire producers, the feedstock inventories at most of the tire producers can supply production for 15–20 days. The tire producers mainly purchased the feedstock according to the actual rigid demand. As the environmental protection inspection was weaker, the operating rate increased slightly at some tire producers in Dongying, Shandong. However, the tire inventories of the end users were ample. Thus, the tire purchase demand will affect the demand for rubber.

Beyond the influence from the fundamentals, the capitals greatly affect the rubber prices. Judging from the price performance of both the forward contracts and the nearby month contracts at the SHFE, the NR price may fluctuate downwards in the short run.