Natural rubber (NR) has its own domineering position in the industry owing to the superior technical performance of this natural elastomer over the synthetic counterpart and its demand will continue to grow aligned with growth of the tyre and vehicle industry, says Dr Lekshmi Nair, Head of Economics & Statistics of the Singapore-based International Rubber Study Group (IRSG). In an exclusive interview to Rubber Asia, she talks at length about the present challenges of the global NR industry in the context of the steep downturn in NR prices and about what is in store for this vital agro-industrial raw material in the days to come. EXCERPTS:

Do you think that factors other than the fundamentals of demand and supply have a major influence on rubber prices.If so please elaborate?

The fundamentals of supply and demand are the major drives for rubber prices. Market imbalance resulting from a disappointing global demand growth during 2012-15 (1.8 per cent) compared to an impressive 3.9 per cent during 2002-11 period caused losing the investor confidence in natural rubber as a financial commodity.
NR prices are also driven by factors other than market fundamentals, notably the price of crude oil, primarily because oil-based feed stocks are used for production of synthetic elastomer. Another factor influencing prices is the currencies of countries where rubber is traded. TOCOM is the primary market for rubber futures and trends in the yen would have an impact on NR prices. However, traded volumes on TOCOM have been in decline for a few years and exchanges in Singapore and Shanghai have started to take more market share. More generally, and like all actively traded commodities, investor sentiments can likely influence rubber prices beyond fundamentals in the short-term.

According to you, what would be the demand-supply scenario of NR in short-term, medium term and long term?

Industry data suggests that NR area expanded enormously both in traditional and marginal areas during the price boom period (2011-13), and more importantly, a larger share of this addition to supply capacity is yet to come. World NR demand is forecast to increase by 3.0 per cent to 12.5 million tonnes in 2016 and by 2.9 per cent to 12.87 million tonnes in 2017. NR demand will grow at 2.9 per cent in short-term (2017-18) and it will increase by 2.8 per cent over longer-term (2017-2025). However, price will remain well below the annual average of 3.9 per cent recorded in 2002-11 period. The world NR market is estimated to be in deficit in 2016, driven by operational level actions of small farmers in response to the prevailing market prices resulting in reduced global production. The outlook for NR supply is sufficient to meet the demand of the industry for all forecast years (2017-2025) based on capacity of already planted trees.

One of the sentiments expressed at the recent ANRPC meet in Guwahati (India) was that the farmers need to think more in terms of multi-cropping and inter-cropping rather than continuing with NR as a mono-crop in view of the cyclical ups and downs of the NR market. Please give your comments?

Current rubber market environment with over capacities and price pressure, major challenge for producers, especially small farmers, is optimisation of farm efficiency through productivity and risk management. This can be achieved by enhancing productivity per given area which support producing rubber from a smaller planted area going in for multi-cropping, and optimising tapping intensity to reduce labour overtime. This can ensure sustainable total farm income via minimising the price risk due to market volatility.

What are the problems connected with accurate estimation and forecasting of NR market? What are your suggestions in this regard?


Rubber is mainly consumed in the tyre sector and the optimistic outlook for vehicle market is the major driver for global rubber demand. Subdued economic growth, in the face of significant expansion in supply capacity and slowdown in demand that lead to growing global uncertainty driven by China, resulted in a market imbalance. Due to continued global uncertainty, the global economic outlook forecast by credible agencies like the IMF and the World Bank turned out to be consistently over-optimistic and hence leading to positive margin of errors in the forecast on vehicle and tyre production and hence rubber demand.
Investment decisions taken earlier created an oversupply situation in many industries globally including rubber which now requires economic adjustment to realign market with rationalisation and consolidation still ongoing today. In an uncertain market with continuing realignment, estimation and forecasting with precision are less likely achieved. Alternative options should be addressed, rather than discussing one case as the most likely case, both upside and downside scenarios should be addressed, in any forecast providing likely different cases for potential discussions.

Please provide us with an update on the NR Sustainability project initiated by IRSG

The Sustainable Natural Rubber (SNR) project is in the second year of its pilot phase, with priority for IRSG in securing self-declared registrations of leading value chain players. A total of 38 industry leader companies /organisations have completed the self-declaration on the SNR-i and many others are in discussion about the SNR-i. Among these 38 self-declared registrants, 58% fall under processors, 21% under down-stream-tyre and 11% each under plantation and trader categories. Main objectives of the project are improving transparency and traceability throughout the value chain and, with strong relations and support from processors and downstream users, help the plantation industry and small farmers to improve their productivity and income.

What do you think of the support to be extended to NR farmers by governments and rubber bodies like IRSG, ANRPC, IRCO, Rubber Boards etc. so that the farmers stick on to NR

Cooperation and collaboration among international rubber organisations, value chain private industry leaders and various governments in the areas of productivity and quality improvement, value addition and capacity building are vital for efficiency optimization and risk management which ensure sustainable income to keep farmers in the land.

Could you tell in brief what is in store for NR in the coming years?

The next driver for change largely depend on the global market reaction to the general belief that China economy has stabilized and is expected to follow a sustained growth level, while improving confidence in other emerging market economies’ growth including India, will probably have impact on commodity prices in general and hence expected to see renewed confidence in the commodity sector.

Any other points you would like to highlight

Natural rubber has its own dominating position in the industry by the superior technical performance of this natural elastomer over the synthetic counterpart and its demand will continue to grow aligned with tyre and vehicle industry growth. Research investments in ‘other natural rubber sources’ are not expected to bring potential competition to Hevea’s commercially viable cultivation and significant supply impact over the next decade. Increasing use of reclaimed/regenerated rubber, especially in China, does have some impact on replacing virgin natural and synthetic elastomer.