Rubber has been an important material that is used in the items that we use in our everyday life, such as gloves and car tires.
But did you know? As a trader, it is actually possible to trade rubber!
In this post, let's learn about the basics of rubber futures.
What is rubber?
Natural rubber is a product from the latex of a species of tree called Hevea Brasiliensis.
There are 2 main types of natural rubber products, namely:
Ribbed Smoked Sheet Rubber (RSS):
Commonly known as RSS, Ribbed Smoked Sheet rubber is an early form of rubber made directly from latex which is treated and then made to coagulate and rolled into sheets.
The rubber sheets are then air-dried or smoked in ovens. RSS rubbers are graded from RSS1 (best quality) to RSS5 (lowest quality) based on key aspects such as the level of smoking, blisters, and stains on the rubber sheets.
Technically Specified Rubber (TSR):
TSR rubber is liquid latex that is left to coagulate naturally and reformed into blocks. TSR rubbers are introduced in the early 1970s as an alternative to RSS rubbers.
Also known as block rubber, TSR is graded through parameters such as dirt, ash, and nitrogen content, alongside properties of the rubber such as its Wallace Plasticity (PO) and its Plasticity Retention Index (PRI).
The most widely-used TSR grades by the tire and rubber industry are the TSR-20 rubbers.
What is rubber used for?
Natural rubber is used for many purposes. Of all, about 73% of the world's natural rubber is used in tire production, which represents about 20 - 40% of the weight of a tire. Rubber's properties help support a vehicle's load and create resistance for the tire.
Meanwhile, rubber is also used extensively in the production of items like surgical gloves, shoe soles, electrical appliances, and driving suits.
Producers and consumers of rubber
The key producers of rubber are mainly from the Asia Pacific region, with countries such as Thailand, Indonesia, and Vietnam being 3 of the top rubber suppliers.
On the other hand, the countries with the highest demand for rubber are China, India, and the US.
What would impact the price of natural rubber?
Let's look into a few factors that impact rubber price:
Supply Side Factors | Demand Side Factors |
|---|---|
|
|
2. Diseases involving rubber trees such as Corynespora leaf fall, Southern American leaf blight (SALB) disease can impact overall rubber production. | 2. Slow economic growth from rubber-consuming countries (eg. China, India, US) which reduces the demand for rubber. |
3. Currency fluctuation impacting import and export of rubber | |
| |
How to trade rubber?
Just like crude palm oil futures (FCPO), rubber is another futures product with its price discovery mechanism centered in Asia (instead of the US or Europe).
The Singapore Exchange (SGX) provides access to 2 types of rubber futures, namely the RSS 3 and TSR 20 grades rubber. These are the most widely recognized rubber grades for both rubber products.
With that, traders can easily gain exposure to both the upside and downside opportunities of the rubber market via the futures market.
The specs for both RSS 3 and TSR 20 rubber products can be found below:
| SGX SICOM TSR20 Futures | SGX SICOM RSS3 Futures |
|---|---|---|
Ticker | TF | RT |
Contract Size | 5 metric tonnes | 5 metric tonnes |
Min. Price Fluctuation | 0.1 US cent per kg | 0.1 US cent per kg |
Value Per Tick | USD 5 | USD 5 |
Trading Hours (SG Time) | Screen T session: 7.55 am - 6.00 pm Pre-Opening: 7.40 am – 7.53 am Non-Cancel: 7.53 am – 7.55 am Opening: 7.55 am – 6.00 pm
NLT T session: 7.55 am – 6.00 pm Note: After the close of the T-session, there will be a 30min grace window for participants to continue registering T-session trades. | Screen T session: 7.55 am - 6.00 pm Pre-Opening: 7.40 am – 7.53 am Non-Cancel: 7.53 am – 7.55 am Opening: 7.55 am – 6.00 pm
NLT T session: 7.55 am – 6.00 pm Note: After the close of the T-session, there will be a 30min grace window for participants to continue registering T-session trades. |
Note: Which rubber futures have more traded volume?
TSR 20 (TF) rubber futures is the rubber futures with more traded volume, suggesting that it is the rubber contract with more depth and liquidity for trading:
Verdict: Exploring the opportunities in rubber futures
Rubber futures is one of the futures products (aside from Crude Palm Oil) of which price discovery is done in Asia.
Timing-wise, this could benefit traders living in the Asia timezone (like myself) thanks to the favourable market hours.
Are you going to give rubber futures trading a try? Let me know in the comment section below!
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Disclaimers
Any of the information above is produced with my own best effort and research.
This post is produced purely for sharing purposes and should not be taken as a buy/sell recommendation. Past return is not indicative of future performance. Please seek advice from a licensed financial planner before making any financial decisions.
Leverage is a financial tool that comes with its advantages and risks. Please learn and understand both the upsides and downsides of leverage before using it for trading.
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