Heatwave halts tapping by China’s top rubber producer

Scorching heat in China’s southwestern province of Yunnan has forced the nation’s biggest natural rubber (NR) producer to cease tapping in the area. Select companies have already stopped tapping after instruction by Yunnan’s Natural Rubber Industry Group, with more to follow suit. Bordering Burma, Laos and Vietnam, most areas in Yunnan have faced severe drought over April-May 2019, with temperatures sometimes reaching 40Celsius (104F).

Over half of China’s annual 800k tonnes of NR production is supplied by Yunnan – the disruption will change futures on the Shanghai Futures Exchange (SHFE) because domestically-produced rubber is widely used for physical settlements of its other agricultural contracts, in a chain reaction path. While it is unknown how much production will be affected, local meteorological estimates of rainfall later this month could help mediate the situation.

Martin Hampson, Vice President of trading at Olam Group’s Chinese rubber division, has said that dry weather in other major producing countries, such as Thailand and Vietnam, had tightened supply, but: “The effect on local markets is more psychological, even though production is relatively small this time of year.”