Rubber-Japan Futures Face Steepest Monthly Slide Since 2017 Amid Trade War, Supply Glut

The Osaka Exchange (OSE) rubber futures market is on track for its largest monthly decline since February 2017, with prices plummeting 16.3% in April 2025 amid a perfect storm of trade tensions, oversupply, and currency headwinds. This drop, driven by U.S. tariff policies and peak harvesting seasons in top-producing regions like Thailand, has investors bracing for further volatility.

The Perfect Storm for Rubber Futures

The 16.3% monthly decline in the OSE October rubber contract (TRB1) marks a stark reversal from earlier optimism. Just weeks ago, prices briefly ticked up to 293 yen/kg on hopes of a U.S.-China trade deal, but those gains evaporated as macroeconomic risks resurfaced. Here’s what’s driving the rout:

1. Trade Wars Take a Toll

U.S. tariffs—particularly a 25% duty on automotive imports and 145% punitive taxes on Chinese goods—have dampened demand for rubber, a critical input for tires and industrial products. China’s retaliatory tariffs, including a 34% duty on U.S. tire imports, have further crimped global trade flows. Analysts estimate that every 1% increase in tariffs reduces rubber demand by 0.5%, compounding the impact of a sluggish manufacturing sector.

2. Supply Glut from Peak Harvesting

Thailand and Yunnan, China—responsible for 40% of global rubber production—are in the midst of their peak harvesting season (February–September). This has flooded markets with latex, pushing inventories to record highs.

3. Currency Wars Add Fuel to the Fire

A strengthening yen, which hit 142.05 yen/USD in April, has eroded Japan’s export competitiveness. For rubber producers, this means lower revenues when converting foreign earnings back into yen—a double whammy for profit margins.

Historical Context: The 2017 Benchmark

The 16.3% monthly drop mirrors the severity of declines seen during the 2017 trade war panic, though precise data for that period is scarce. Analysts note that February 2017 prices for Tokyo rubber futures closed at 331 yen/kg, but subsequent contracts (e.g., March 2017) fell to 315.6 yen/kg, reflecting a similar supply-demand imbalance. The current slump, however, is compounded by modern challenges:

• Debt-Fueled Overcapacity: Chinese tire manufacturers expanded aggressively during the 2010s, creating excess capacity.
• Climate Risks: Monsoons in Thailand and droughts in Indonesia could disrupt supply chains in the coming months, though current forecasts suggest peak-season gluts will dominate.

Looking Ahead: Stabilization or Further Declines?

Analysts project prices might stabilize at 171.27 U.S. cents/kg by mid-2025, but this hinges on resolving trade disputes and supply-demand imbalances. Key risks include:

• Geopolitical Uncertainty: U.S.-China talks remain fragile, with no breakthroughs on tariffs.
• Monsoon Season: A severe Thai monsoon could cut supply by 10–15%, temporarily boosting prices.

Conclusion: A Fragile Equilibrium

Japan’s rubber futures market is at a crossroads. While the 16.3% monthly decline underscores the fragility of demand in a protectionist era, prices are unlikely to collapse further unless new shocks emerge. Investors should monitor three key metrics:

1. U.S.-China Trade Talks: A deal could lift prices by 5–8% by easing tariff fears.
2. Yen Appreciation: A return to 140 yen/USD could add modest support.
3. Supply Disruptions: Watch Thai weather patterns for potential supply shocks.

For now, rubber futures remain trapped in a 285–300 yen/kg range, with traders betting that the 2025 slump won’t eclipse the 2017 crisis—yet. The path forward hinges on whether global policymakers can untangle the knots of trade and climate risks that have paralyzed the market.

Data sources: Osaka Exchange (OSE), Singapore Commodity Exchange (SICOM), Tokyo Commodity Exchange (TOCOM).