Rubber prices surge, Vietnamese producers remain cautious on new upcycle

Global natural rubber prices have climbed back to the peak last seen in 2017 as seasonal supply shortages and rising stockpiling demand tighten the market, but most Vietnamese rubber producers remain cautious about prospects for a sustained upcycle in 2026.

Short-term factors driving rally

Natural rubber prices have recently hovered around 220 U.S. cents per kg, their highest level in nearly a decade and close to the peak reached in 2017.

The rally has been driven by a combination of factors. In energy markets, elevated Brent crude prices amid geopolitical tensions in the Middle East have increased production costs for synthetic rubber, encouraging manufacturers to shift toward natural rubber.

At the same time, trade uncertainties and risks of global supply chain disruptions have prompted tire makers and automobile manufacturers to increase raw material stockpiling.

In a rubber sector report published in March 2026, research analysts at Thailand’s Krungsri Bank said international trading partners were building inventories to reduce supply chain risks, particularly in the automotive and electric vehicle tire industries.

However, stronger demand has coincided with the low production season for Vietnam’s rubber industry. The first quarter each year typically overlaps with the period when rubber trees shed leaves and latex tapping is suspended, leading to a sharp decline in output.

The situation was evident at Hoa Binh Rubber JSC (HoSE: HRC), which said it harvested only around 14 tons of latex in March, while total first-quarter output reached 389 tons. By April, tapping activities had stopped completely as plantations entered the leaf-shedding season. External supply for procurement also became scarce for the same reason.

With production falling while demand remained high, the company increased sales of inventory to fulfill orders. According to its Q1 financial statements, inventory value at the end of the period had fallen by roughly half from the beginning of the year to around VND30 billion ($1.14 million).

A similar trend was seen across larger producers in the sector.

Vietnam Rubber Group posted Q1/2026 net profit of over VND2.51 trillion ($95.5 million), its highest quarterly level in the past five years. Inventory declined sharply by more than VND2.3 trillion ($87.4 million) from the start of the year to nearly VND4.21 trillion.

The development reflects the seasonal nature of the rubber industry, where Q1 output is typically much lower than during the rest of the year, even as companies must maintain supply for exports and processing operations.

As the new tapping season begins in May, however, supply shortages are expected to gradually ease, raising questions over whether rubber prices can remain at current elevated levels.

Producers maintain cautious outlook

Despite favorable market conditions, business plans released by many rubber companies suggest continued caution toward 2026 prospects.

According to documents prepared for its annual shareholders’ meeting, Vietnam Rubber Group targets consolidated revenue of VND33.8 trillion ($1.28 billion) in 2026, up 4.2% from the previous year. However, pre-tax profit is projected to decline 2.9% to over VND6.9 trillion ($262.3 million).

Notably, although the group expects latex output to exceed its production target by at least 5%, the relatively modest revenue growth target suggests it does not expect rubber prices this year to significantly outperform 2025 levels.

Similarly, Dong Phu Rubber JSC (HoSE: DPR) targets latex output of 12,733 tons in 2026, down about 4.3% from the previous year, while projected revenue is expected to fall 16.2% to around VND995 billion ($37.8 million).

Phuoc Hoa Rubber JSC (HoSE: PHR) is among the few companies forecasting stronger growth. The company targets 2026 revenue of nearly VND2.28 trillion ($86.46 million), up 27%, while net profit is expected to rise 49% to VND762 billion ($28.96 million).

However, the main growth driver for Phuoc Hoa is not its core rubber operations but income related to compensation payments related to land for expressway building or industrial park development.

The company said the Ho Chi Minh City-Thu Dau Mot-Chon Thanh Expressway project and the Bac Tan Uyen 1 Industrial Park are being developed on its rubber plantation land. During 2026-2028, it expects to record annual land compensation income of around VND700-800 billion ($30.4 million).

Overall, business plans across the sector suggest producers are not yet convinced current price levels can be sustained over the long term.

The market experienced a similar rally in 2017, when rubber prices surged due to recovering oil prices, concerns over supply shortages in Southeast Asia and stockpiling demand from China. However, prices remained elevated only briefly before falling sharply as supply recovered and demand weakened.

As a result, many companies’ expectation that average selling prices in 2026 will remain broadly in line with 2025 levels, at around 170-190 U.S. cents per kg, appears cautious but reasonable.

Unlike previous price cycles, the current rebound in rubber prices has been driven more by geopolitical tensions, energy costs and inventory accumulation rather than a genuine surge in end-user demand.

That helps explain why, despite prices returning to their highest levels in nearly a decade, most domestic producers continue to maintain relatively conservative business plans.

As global supply gradually recovers with the new harvesting season, developments in oil prices, global automobile demand and the pace of China’s manufacturing recovery will remain key factors determining whether rubber prices can sustain current levels.