Natural Rubber Goes Crazy, Breaking 21,000 Intraday!

Natural rubber prices continue to strengthen, adding further cost pressure on the tire industry.

As of Oct. 12, the main contract of natural rubber futures at the Shanghai Futures Exchange closed at 20,640 Yuan/ton, once breaking 21,000 Yuan intraday, creating a new high since 2017. The spot market rose synchronously; as of Oct. 9, the average price in the domestic natural rubber market reached 19,700 Yuan/ton, up 28.27% cumulatively this year and 31.45% year-on-year.

Rising raw material prices are pushing tire enterprises to adjust prices centrally, but whether price hikes can cover cost increases still depends on channel acceptance and end-user demand performance.

El Niño and Tightening Supply Drive Rubber Prices Higher

This round of natural rubber price increase, weather factors have become an important catalyst.

According to relevant climate monitoring information, sea surface temperatures in the equatorial central-eastern Pacific anomalously rose in September 2026, the expectation formed by the super El Niño event intensified market concerns about subsequent natural rubber production cuts.

Global natural rubber main production areas are concentrated in Southeast Asia, rubber tree growth and tapping operations are relatively sensitive to climate conditions. Continuous drought may affect latex secretion, while heavy rainfall will reduce the number of effective tapping days. Currently, rainfall in some parts of Thailand affects the tapping rhythm, and the market is also paying attention to the impact of El Niño on fourth-quarter supply in major production areas such as Thailand and Indonesia.

Long-term changes on the supply side are equally important. Natural rubber production cycle is long; rubber trees typically need to grow for 6 to 8 years before entering the commercial tapping stage. In past years, insufficient investment in new plantings and rubber plantation updates, aging rubber trees in some traditional production areas constrain supply increase growth.

The Association of Natural Rubber Producing Countries predicts global natural rubber production in 2026 will be about 15.039 million tons, up 0.6% year-on-year; demand will be about 15.356 million tons, up 0.4%. Based on this estimate, the annual supply-demand gap will be about 317,000 tons.

Falling inventory also supports prices. Data shows, as of Oct. 12, China's natural rubber social inventory is about 1.096 million tons, down 130,000 tons month-on-month.

However, supply performance from global rubber-producing countries is not consistent, with Thailand's production still expected to grow. Whether subsequent rubber prices can continue to rise needs verification from actual production and inventory data.

Rising Raw Material Costs, Increased Corporate Operating Pressure

For the tire industry, the impact of rising natural rubber prices is gradually becoming apparent.

All-steel tires have a high dependence on natural rubber, truck and bus tire enterprises are more easily directly affected by rubber price fluctuations. Semi-steel tires, although having a higher proportion of synthetic rubber, similarly cannot completely escape the cost pressure brought by natural rubber price hikes. Combined with rising prices of raw materials such as synthetic rubber and carbon black, tire enterprises face a situation where multiple costs rise simultaneously.

Price hikes have thus become an important means for enterprises to alleviate pressure. Since September, tire enterprises have frequently issued price adjustment letters, and the scope of price hikes has continued to expand, reflecting the transmission of upstream cost pressure to the downstream.

But it needs to be noted that price adjustment letters do not equal actual transaction price increases. After tire enterprises adjust ex-factory prices, they need to transmit to the terminal through distributors, retail stores, etc. If market competition is fierce and consumers are price-sensitive, the terminal price increase may be lower than the factory price adjustment magnitude.

This also means differences will emerge in the ability of different enterprises to bear cost pressure. Head enterprises with larger procurement scales, well-designed supply chain layouts, and higher brand premiums usually possess more room for cost management.

In contrast, small and medium-sized tire enterprises are relatively weak in terms of capital, orders, and bargaining power. If terminal price hikes are not smooth, profit margins may narrow further.

Q4 Trend Still Has Variables, Focus on Supply and Demand Changes

Looking ahead to the fourth quarter, the natural rubber market will continue to be influenced by weather, supply, inventory, and demand.

If Thailand's peak production season supply recovery falls short of expectations, while production cuts in production areas such as Indonesia occur, the global supply-demand gap may widen further, and rubber prices still have support. Conversely, if weather impacts are weaker than expected and production area supplies gradually recover, the risk premiums accumulated previously may fall back.

Demand side is also key. Raw material price hikes can push tire enterprises to raise prices, but it may also raise dealer inventory costs, affecting channel procurement enthusiasm. If terminal demand cannot follow up synchronously, the cost transfer space brought by price hikes will be limited.

For tire enterprises, in the following, need to pay attention to raw material price changes, and also control inventory and capital occupation, avoiding blind stockpiling at high price stages. For dealers, need to arrange procurement combined with actual sales rhythm, and cannot expand inventory solely based on price hike expectations.

Overall, natural rubber supply growth has slowed, providing fundamental support for current rubber prices, but after prices continue to rise, downstream affordability will also become an important constraining factor.

How this round of market trends ultimately evolves depends not only on how high natural rubber can rise, but also on whether tire enterprises can successfully transmit cost pressure to the market.