Rubber Rally Ahead: Why SICOM Futures Are Set to Soar in 2025

The global rubber market is at an inflection point. Asian physical rubber prices have surged in June 2025, driven by a perfect storm of structural and short-term catalysts. Yet, a glaring 10% valuation gap persists between SICOM TSR20 futures and Thai STR20 physical rubber prices—a divergence that presents a rare high-conviction trading opportunity. Investors who act now could capitalize on a convergence trade poised to deliver outsized returns.

The Structural Bull Case: Why SICOM Will Catch Up

The valuation gap between SICOM TSR20 futures (currently trading at 166.2 US cents/kg) and Thai STR20 physical rubber prices (61.44 baht/kg, or ~60.8 baht/kg when converted) is unsustainable. Three key drivers will force prices higher:

1. Global Inventory Drawdowns

Global rubber inventories have plummeted by 15% since early 2025, with China's aggressive restocking efforts driving demand. China's auto exports surged 16% in Q1 2025, and analysts project a further 5-7% rise by Q3, fueling tire production needs. . With Qingdao port inventories nearing 569,000 tons (down from 670,000 in early 2024), the physical market is tightening—a stark contrast to SICOM's lagging futures price.

2. EV Tire Demand Resilience

While EVs reduce maintenance needs, they still require the same number of tires as conventional vehicles. With global EV sales hitting 20 million annually by 2025, demand for premium natural rubber—critical for low-rolling-resistance tires—is booming. EV manufacturers like Tesla and BYD are increasingly specifying natural rubber blends, locking in long-term demand. This isn't a fad; it's a structural shift.

3. Geopolitical and Weather Risks

Thailand, the world's largest rubber producer, faces monsoon season risks that could disrupt short-term supply chains. While long-term La Niña conditions may stabilize yields, any delay in harvests could trigger speculative buying. Meanwhile, U.S. tariffs on Chinese tire imports have reduced demand from traditional buyers—but EV adoption and Asian restocking are offsetting this drag.

The Catalysts to Watch Now

The convergence trade isn't just theoretical. Three near-term catalysts will accelerate price action:

1. China's Q3 Restocking Surge: With auto exports rising and tire factories ramping up production, Chinese buyers will likely snap up rubber futures to secure supplies.
2. Monsoon-Induced Volatility: Rain delays in Thailand could tighten physical supplies, pushing STR20 prices higher and forcing SICOM to catch up.
3. Crude Oil Linkage: Natural rubber prices often correlate with crude oil movements. With Brent crude holding above $70/barrel, the cost of synthetic rubber alternatives rises, boosting demand for natural rubber.

The Trade: Go Long SICOM June Contracts

Entry: Buy SICOM June 2025 futures at 166.2 US cents/kg.
Target: 185 US cents/kg by Q4 2025, reflecting a 10% premium to Thai STR20 prices.
Stop-Loss: Below 168 US cents/kg, signaling a breakdown of the upward momentum.

This isn't a guess—it's math. The 10% valuation gap must close, and historical precedent backs this. In 2022, a 20% price gap closed when SICOM surged by 20% after similar fundamentals. Technical traders note the 20-day moving average crossed above the 50-day MA in late 2022, a bullish signal now reappearing.

Risks to Manage

• Inventory Overhang: Qingdao's inventories could rise to 600,000 tons by year-end, capping upside. Monitor weekly inventory reports closely.
• Monsoon Disruptions: Heavy rains could delay harvests but also trigger speculative rallies. Stay nimble.
• EV Innovation: If tire-less EV designs or synthetic rubber gains traction, natural rubber's premium could erode. This is a long-term risk, not an immediate threat.

Conclusion: Act Now—The Clock Is Ticking

The SICOM-STR20 gap is a once-in-a-cycle opportunity. With China's restocking cycle underway, monsoon risks looming, and EV demand locked in, the path to convergence is clear. This isn't just a trade—it's a bet on the structural reshaping of the rubber market.

Recommendation: Establish a long position in SICOM June contracts immediately. Use a stop-loss at 168 US cents/kg and aim to hold until Q4 2025. The reward-to-risk ratio is compelling, and the window to act is narrowing as inventories tighten.

In a market where physical rubber prices are surging and futures lag, the smart money is already moving. Don't miss the rally.

Data as of June 19, 2025. Past performance does not guarantee future results. Always consult a financial advisor before making investment decisions.