Rubber market faces price declines and lower auction supply in February

Sri Lanka’s rubber market experienced a price decline in February, with a notable reduction in the quantity offered at the public auction, according to the latest report from Forbes and Walker Commodity Brokers.

The total quantity of rubber offered at the auction dropped to 577,368 kilograms from 711,379 kilograms in February 2024. The decrease in supply comes amid several market challenges and shifts in demand patterns.

The top-grade LCR 1X fetched an average price of Rs. 925 per kilogram, while other grades saw declines. The average price for Latex Crepe No. 1 fell by Rs. 65 per kilogram, and the prices for No. 2 grades dropped by Rs. 28.75. Prices for No. 3 and No. 4 grades decreased by Rs. 11.25 and Rs. 70.75, respectively.

Scrap Crepe also saw a decline, with 1X Brown dropping by Rs. 6.25, and 2X Brown decreasing by Rs. 12.50. However, 3X Brown and 4X Brown grades bucked the downward trend, with 3X Brown increasing by Rs. 0.25, and 4X Brown rising by Rs. 1.83.

The Rubber Sheet Scrap (RSS) segment saw limited market availability, primarily due to imported RSS being sourced at lower prices by tire manufacturers. Additionally, some smallholders diverted latex to centrifuged latex processing plants, and others withheld stocks due to unfavorable pricing. As a result, no RSS grades were quoted at the auction for the entire month.

The downturn in rubber prices can be attributed to a combination of factors, including reduced demand from local industries, US tariff regulations, and falling crude oil prices, which have dampened market conditions.

In response to these challenges, the Sri Lankan government has proposed an initiative aimed at bolstering the country’s rubber industry. A budget allocation of Rs. 1,500 million has been set aside for 2025 to establish an industrial estate dedicated to the production of value-added automobile components and rubber products. The initiative is part of the government’s broader strategy to enhance the rubber industry’s long-term growth and global competitiveness.