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Can the rubber sector’s upward momentum persist?

Release Date:

2023-09-20

Benefiting from the peak of global liquidity tightening now receding and a resurgence of macro‑level optimism, coupled with a sharp rally in crude oil futures that has cascaded downstream to butadiene rubber, both Shanghai rubber and standard rubber futures have strengthened in tandem. With downstream demand entering its peak season and port inventories continuing to decline, the SHFE rubber 2401 contract surged to its daily limit in early September and has since maintained a volatile yet upward‑trending trajectory, with the contract’s price center steadily shifting higher. Supported by a confluence of positive factors, Shanghai rubber futures are likely to remain on a relatively firm footing going forward.

Benefiting from the evident peak of global liquidity tightening and a resurgence of macro‑level optimism, coupled with a sharp rally in crude oil futures that has cascaded downstream to butadiene rubber, both Shanghai rubber and standard rubber futures have strengthened in tandem. With downstream demand entering its peak season and port inventories continuing to decline, the SHFE rubber 2401 contract surged to its daily limit in early September and has since maintained a volatile yet upward‑trending trajectory, with the contract’s price center steadily shifting higher. Supported by a confluence of positive factors, Shanghai rubber futures are likely to remain on a relatively strong footing going forward.

After more than a year of sustained, unconventional interest-rate hikes, European and U.S. economies now find themselves in a high‑interest‑rate environment, with risk events emerging in the banking sectors and mounting recessionary pressures. Data show that in August 2023, the preliminary manufacturing PMIs for the United States and the eurozone stood at 47.0% and 43.7%, respectively—both remaining below the threshold indicating contraction, underscoring continued contraction in the manufacturing sectors of major economies. Meanwhile, an inverted U.S. Treasury yield curve is widely regarded as a harbinger of economic recession; since July 2022, the yield spread between the two‑year and ten‑year Treasury notes has remained inverted for over a year, with the maximum inversion reaching 100 basis points. At the same time, recent U.S. data revealed that the August nonfarm payrolls figure posted a sharp rise in the unemployment rate to 3.8%, matching the level seen in February 2022. The labor-force participation rate climbed to 62.8%, its highest since the onset of the pandemic. Following the release, market expectations shifted: the probability of no Fed rate hike in September rose to 93%, while the likelihood of a 25‑basis‑point increase in November fell to 31%; moreover, the first anticipated rate cut was brought forward from July 2024 to June 2024.

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