Commodity Rubber - Everything you need to know about Rubber

Rubber can be divided into two categories, based on their origins. Natural rubber is created from the milk of a rubber tree, where as synthetic rubber is created using a basis of petroleum. There a number of different grades of synthetic rubber, based on the chemicals used n the production process. By adding specific chemicals, rubber can be made soft as a sponge, hard as a bowling ball or as resilient as a rubber band. This unique characteristic has led to rubber being used in numerous applications and virtually every aspect of daily life


The first evidence of the use of rubber dates back to the 11th century. Inhabitants of South-America used the rubber to produce balls for various games. During 1493, Columbus returned to the Americas, after its initial discovery, and came upon the native Americans playing with rubber balls. After some research, he discovered that the balls were created from natural rubber out of the milk of a rubber tree. The natives taught the Spanish about the many other uses for rubber and brought it back to Europe. The rubber products made little impact on the Europeans and they neglected rubber at first glance. The French came upon the rubber during the second half of the 17th century and started experimenting with the substance, realizing its potential. After many years, they developed a method for effectively producing rubber, which was soon adopted by other nations. The various global empires wanted to secure their supply of rubber and started plantations in their respective colonies. This way the rubber spread across both the African and Asian continent. During the industrial revolution, a number of machines were invented which greatly increased the production capabilities for rubber. Machines in rubber factories nowadays are based on these original machines.

Natural Rubber Production

Natural rubber comes from the Havea Brasiliensis tree, which grows in tropical regions. The tree becomes economically viable after 7 years and will last for about 10 to 25 years, depending on the skill of the tapper and bark preservation. There are a number of steps involved in the production of natural rubber.


The first step is called tapping, in which the latex is collected from the tree. A tapper will make a downward spiral cut, using a hook shaped knife, in the bark of the tree to expose the latex vesicles. This cut is made on one half of the tree, so the other side can heal. The spiral cut allows the latex to flow towards one point where it will be collected in a small container. This container can be a half coconut shell but is more often an aluminum or glass container. Tapping is performed during the night or early in the morning, when the temperature is still low. This is done to prevent coagulation of the latex and maximize the quantity of latex collected.


The first step in processing the collected latex is removing a part of the water in the substance and raise it to a minimum of at least 60 percent latex. A dilute acid is added to the collected latex, which will cause it to coagulate. Once the rubber has coagulated, the excess liquid needs to be removed from the rubber. The liquid will be removed through the use of a number of rollers which will wring the liquid from the rubber. The final set of rollers have a pattern on them which will print a texture on the rubber. The rubber is now pressed into a mold for easy transportation. The rubber will be left to dry for approximately one week, after which the rubber will be ready to be sold.

Synthetic Rubber Production

Synthetic rubber is most commonly produced from two ingredients: Butadiene and Styrene, which are both by-products of petroleum refining. When these two ingredients are combined in the presence of soapsuds in a reactor. The subsequent chemical reaction will cause the substance to transform into liquid latex. This liquid latex can then be further processed into actual rubber. The further refinement process is similar to natural rubber. The latex will be extended with a dilute acid to force the latex to coagulate. The solid latex is then pushed through heavy rolls, where the excess liquid is removed from the rubber. The final rolls will imprint a texture in the rubber and afterwards the rubber is dropped in a molt to prepare the rubber for transport.


The most common use of rubber is in the production of tires. Tires are commonly created by combining natural and synthetic rubber. However natural rubber is preferred as it has a higher resistance against heat, which is critical for high-quality tires.
Due to its high water resistance, rubber is highly effective in rainwear and diving gear. It is also heavily used in hoses and tubes in both medical and chemical industries, for its ability to conduct liquids.
The textile industry uses rubber for a number of different purposes. The elastic element of rubber makes it very effective for clothing which requires the ability to stretch. The toughness of rubber makes it very useful in protective clothing both for both work and in sports. This makes it also an ideal compound for the shoe industry, as it is both strong enough to be wear resistant as well as water resistant. It is therefore commonly used in the production of the soles of shoes.

Trading of the commodity Rubber

Trading rubber and their related derivatives takes place on a number of commodity exchanges around the globe. The main derivative exchanges for rubber are located in Asia, these are: Tokyo Commodity Exchange, Osaka Mercantile Exchange and the Singapore Commodity Exchange.
The physical trading of rubber mainly takes place on exchanges in New York (NYMEX), London and Kuala Lumpur.

Price Factors

The prices of rubber are influenced by a number of factors. Weather conditions can have a major impact on the price of rubber. Natural rubber production requires very specific conditions and changes herein can greatly influence the supply of this commodity.
The car industry accounts for roughly 70% percent of the global demand for rubber. Decreasing car sales and production are therefore a major factor in decreasing demand for rubber. Predicting the rubber demand of the car industry can help indicate the future prices of rubber.
The strong and steady industrialization of China and India are major contributors to the increasing demand for rubber. The heavy industries in these countries demands huge quantities of rubber, which are difficult for producers to meet. Producers are increasing their capacity to meet this rising demand, but this will take time. Meanwhile the shortage will push prices to new heights.

TOCOM Rubber Futures Contract

The TOCOM Rubber Futures Contract on the Tokyo Commodity Exchange is based on the underlying rubber type: Ribbed Smoked Sheet (RSS) No. 3. A single contract has the following specifics:

Product Symbol TCE/JRU
Contract Size 5,000 kg (5 tonnes)
Contract Months Six consecutive months
Tick Size 500 JPY