On October 12, the main natural rubber contract price briefly surged to 21,005 yuan per ton, hitting a new high since February 2017.
However, this rally failed to sustain, and natural rubber futures prices subsequently retreated in consecutive sessions.
The reasons lie in three aspects: first, reduced rainfall in Southeast Asia led to a pullback in raw material rubber prices, loosening cost support; second, since September, downstream tire demand for natural rubber has been generally lackluster, especially with weak performance in semi-steel tires, suppressing upward momentum in rubber prices; third, Federal Reserve officials recently密集 released hawkish signals, prompting bulls who entered earlier to take profits and exit en masse.
So, is this pullback in natural rubber the end of the bull market, or a phased adjustment during an uptrend?
Overall, the foundation for natural rubber's slow bull market remains intact, and the market will short-term shift into high-level wide-range consolidation.
Three major bullish factors
First, the current El Niño continues to strengthen.
The World Meteorological Organization confirmed on September 3 that El Niño has formed and will continue to develop.
NOAA predicts an 81% probability that it will reach a very strong level from October to December.
UN-related agencies warn that this El Niño will peak in December, possibly the strongest since 1950, and persist into early 2027.
Looking back at history, three iconic strong El Niño events occurred in the past 40 years: 1982–1983, 1997–1998, and 2015–2016, and the predicted intensity of this round is higher than those previous events.
Natural rubber is highly sensitive to El Niño for three main reasons.
First, production areas are highly concentrated.
Thailand, Indonesia, Vietnam, and Malaysia together contribute over 70% of global output, with Thailand alone accounting for 30%–35%, and Southeast Asia as a whole producing over 90% of the global total.
These production areas are all located in the core zone affected by El Niño-induced drought.
Second, rubber tree growth is highly dependent on a hot and humid environment.
Sustained drought inhibits latex flow in the lactiferous ducts, and high temperatures reduce the metabolic efficiency of rubber trees; drought also causes bark cracking, increases latex viscosity, makes tapping more difficult, and compresses the number of effective tapping days.
Third, hindered tapping easily induces pests and diseases.
Under high temperature and drought conditions, powdery mildew is prone to outbreaks, potentially forming a vicious cycle of drought stress—weakened tree vigor—pest and disease outbreaks—reduced output.
In addition, El Niño's damage to rubber tree bark and roots has a clear lag effect; even if rainfall increases later and drought conditions ease, the recovery of per-tree yield generally takes 6 to 7 months.
Second, global natural rubber production is trending downward.
The latest ANRPC data show that in August 2026, natural rubber production of its main member countries was 1.0726 million tons, up 5.27% month-on-month but down 3.60% year-on-year; cumulative production from January to August was 6.3597 million tons, down 1.99% year-on-year.
Substantive supply-side production cuts provide support for medium- to long-term rubber price trends.
Statistics show that in 2026, over 60% of rubber trees in Southeast Asia are over 25 years old.
By country, Malaysia has 44% of trees over 25 years old, Indonesia about 47%, and southern Thailand over 40% of trees over 35 years old.
Old trees have poor drought resistance, with per-tree yields about 40% lower than during peak production periods; combined with the downturn in the rubber planting cycle after 2016, total rubber planting area in ANRPC member countries has shrunk by 7.3% over the past decade.
Newly planted rubber trees require 5 to 7 years before they can be tapped.
Meanwhile, large numbers of rubber plantations in Indonesia have been converted to oil palm, with annual rubber production falling from 3.19 million tons in 2023 to 2.04 million tons in 2025; such capacity exits have short-term irreversible characteristics.
With capacity entering a downward inflection point, this round of natural rubber market action has sustainability and elasticity, and is expected to be stronger than years affected only by El Niño disturbances.
Third, social inventory and warrant inventory are generally low.
The latest data show that natural rubber social inventory stands at 1.11 million tons, down 2.8% month-on-month and 0.2% year-on-year, at a low level of the 5.5th percentile over three years.
Demand side should not be overly bearish
Data show that in September, domestic all-steel tire production was 12.37 million units, down 5.9% both month-on-month and year-on-year; cumulative production from January to September was 113.28 million units, up 2.10% year-on-year.
September semi-steel tire production was 48.15 million units, down 11.8% month-on-month and down 20.1% year-on-year; cumulative production from January to September was 499.54 million units, down 3.17% year-on-year.
Since September, domestic tire operating rates have weakened noticeably, with semi-steel tire production falling to a low in recent years.
The weakening in semi-steel tire demand was basically in line with market expectations, mainly due to the high base formed by last year's rush to export and the landing of anti-dumping policies in July this year.
September all-steel tire demand was also weak, falling short of expectations, possibly dragged down by high prices of raw materials such as rubber and carbon black, leading tire companies to proactively reduce operating rates and digest inventory.
Overall, although tire demand has weakened in stages, the market outlook should not be overly bearish.
In general, downstream resistance to high-priced raw materials mainly suppresses the upward elasticity of the market and is not yet sufficient to directly reverse the trend.
At the same time, affected by geopolitical factors, international crude oil prices remain elevated, providing support for synthetic rubber prices, which in turn drives substitution demand and indirectly underpins natural rubber prices.
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