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Raw materials outlook: Cotton, rubber prices to stabilize in 2019

John Baffes's picture
This blog is the sixth in a series of ten blogs on commodity market developments, elaborating on themes discussed in the latest edition of the World Bank’s Commodity Markets Outlook. Earlier blogs are here.
 
The World Bank’s Raw Materials Price Index is expected to stabilize in 2019 after rising marginally in 2018. The Index declined nearly 4 percent in the third quarter of 2018 (q/q) as natural rubber prices plunged but is at roughly the same level as 2017 Q3.
 
Raw materials price index


Cotton

Cotton prices are expected to remain nearly flat in 2019, following a projected gain of 11 percent in 2018. Cotton prices declined marginally in the third quarter of 2018 but are still 15 percent higher than a year ago. Although global cotton production outpaced consumption by a small margin in 2017-18, production next season is projected to decline by 4 percent, creating room for further unwinding of China’s stocks, which are still high by historical norms. China currently accounts for nearly 40 percent of global stocks, down from 60 percent during the three seasons ending in 2015-16.
 
Cotton price
 
Cotton stocks

Natural rubber

Natural rubber prices are expected to remain low in 2019 after a projected 20 percent decline (y/y) in 2018. Prices plunged 12 percent in the third quarter to a 30-month low. The recent weakness follows last year’s sharp decline when prices dropped more than 35 percent within 4 months. Depressed prices reflect rising output due to very favorable weather conditions in Thailand and Vietnam, the world’s top suppliers, and weak demand from China, leading to an unusually high stocks accumulation. A 10 percent import duty by the United States on Chinese tires along with the slowing pace of tire imports by the European Union are further depressing demand, since about two-thirds of natural rubber goes to tire manufacturing.
 
Natural rubber price

Natural rubber stocks

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