Report released by Helixtap Technologies outlines how greater market volatility and inequity in the supply chain from the COVID-19 shock can be addressed through digital transformation
29 September 2020, Singapore The rubber industry must explore new technologies to manage price volatility and reduce inequity across supply chains according to Helixtap Technologies’ research paper, “Natural Rubber: Stretched to the Limit, Ready for Change” published today.
The report, authored by Charles Spencer, equity research analyst at Smartkarma, puts the volatility of natural rubber in its historical context while highlighting the recent impacts of COVID-19 on its price as a traded commodity. The report also details forward-looking views on rubber markets as they look to rebound from this global market shock and how the use of technology can counteract the cycles of booms and busts within the rubber industry.
In the era of smart technology, there has been growing discourse on digitising the commodities market. Modernising the rubber supply chain would shift rubber from being inherently volatile to a commodity that can be more easily risk-managed. The commodities market is already undergoing digitisation to unlock a potential $70 billion in market value and the rubber industry needs to ensure it is active in this move.
Digitisation brings many benefits for market participants in the rubber industry, as highlighted in the report. These include improved market access, transparency and pricing. In addition, participants can undertake more timely trades through streamlined processes and access improved market products to counteract the inherent price volatility of rubber, to mitigate risks.
Farah Miller, CEO of Helixtap Technologies comments, “The rubber industry has undergone several reinventions throughout its history and is now at the start of a new, digital era. Digital innovators, such as Helixtap Technologies, are also creating opportunities for all market participants, delivering improved market transparency and connectedness to mitigate market risk for those, primarily smaller businesses, who have borne most of the risk up till now.”
Charles Spencer, equity research analyst at Smartkarma and author of the report adds, “The pricing volatility arising from the COVID-19 pandemic and its impact on trade with China and automobile sales is one of many pricing shocks for the rubber industry. Although the rubber industry has been somewhat slow to move in the past, there are now clear opportunities for market developments through the use of technology, to empower and future proof the industry.”
The full report is available for download from the Helixtap website.
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Further notes:
From the report’s author, some of the key pricing highlights for natural rubber are:
- Pricing lows for the current cycle are behind us. The market-tested this low earlier this year and found it on 1-April at a price of just US$1.27/kg (RSS3). Since then prices have recovered by ~45% to the current level of US$1.85/kg. However, the author is forecasting that this bounce is unlikely to be the start of a move back to levels seen during earlier bull markets. Instead, a forecast of industry oversupply to cap pricing at ~US$2/kg for the next few years.
- We forecast demand eventually catching up with supply and ultimately tightening the market fundamentals to a level where pricing can be squeezed substantially above the US$2/kg level.
For more information please contact Tazkiah Baaquie: tazkiah@helixtap.com
About Helixtap Technologies
Helixtap Technologies is an independent, digital platform for the rubber industry, delivering actionable insight, driving value and creating opportunities for the entire supply chain, across pre-trade, trade and post-trade environments.
Helixtap’s platform raises the profile and offers initiatives to support smaller firms, provide smart logistics and supporting services such as automated contracts, financing, marketing, talent training to assist micro, small and medium businesses in the rubber value chain to reach international markets.
About Charles Spencer, research equity analyst at Smartkarma and author of the report
Charles Spencer is a research analyst who covers the global commodities markets and Asian equities; he publishes on Smartkarma, an independent research platform. He previously worked as an Executive Director at Morgan Stanley for over 25 years in New York, London and Singapore. His recent work includes a series of insights focusing on Environmental; Social & Governance (ESG) standards and performance across Morgan Stanley’s regional coverage.