EU amendment to deforestation regulation weakens rubber demand, prices

Natural rubber prices softened Nov. 15 following the EU's amendment to its European Union Deforestation Regulation (EUDR) as traders were unsure what the new regulation would mean for the rubber market.

Platts, part of S&P Global Commodity Insights, assessed Natural Rubber TSR 20 FOB Southeast Asia at $1,900/mt Nov. 15, down $60/mt on the week.

Demand had been weak but the new rule proposed Nov. 14 introducing a new category of countries posing "no risk" to deforestation, alongside the existing "low," "standard," and "high" risk categories left traders uncertain on how trade flows would be impacted, partially because the list of countries in the "no risk" category has not yet been disclosed. The EU planned to disclose what countries fall under that category by June 30, 2025.

The disclosure is important because countries categorized as "no risk" would encounter less stringent trading requirements.

The deforestation regulation, adopted by parliament on April 19, 2023, seeks to combat climate change and biodiversity loss by curbing deforestation linked to EU consumption of products like wood, rubber cocoa, soy, palm oil, and coffee. The regulations were initially meant to come into effect Dec. 30 2024, were postponed by a year to Dec. 30, 2025, according to an EU announcement Nov. 14. The regulation stipulates "large operators and traders would have to respect the obligations stemming from this regulation as of 30 December 2025, whereas micro- and small enterprises would have until 30 June 2026," the EU said.

The EUDR proposal was met with confusion by market participants.

"Everyone is waiting to properly understand the EUDR proposal and what impacts it will have. It poses an awful lot of work, having to trace back where the materials come from, which will make things much more expensive," a trader said Nov. 15.

Another trader commented that despite the regulation being postponed, demand has already softened because of it and there were concerns of supply building up that would put additional bearish pressure on the market.