Natural rubber prices are likely to take a dip after 2012 due to acceleration in normal production on account of massive new planting undertaken across the major natural producing countries of the world during 2005-08, says Dr Hidde P Smit, the world-renowned rubber industry analyst.

“This effect, however, will taper off after 2020,” the former Secretary General of International Rubber Study Group (IRSG) said in his presentation on The World Rubber Industry in the Next Decade, at the National Meeting on Natural Rubber, an event held recently parallel to Expobor 2012 at Sao Paulo, Brazil

Post 2011 trends

In his comprehensive analysis of the production-consumption scenario leading to higher prices of NR in 2011, Dr Smit points out that the extremely high growth in consumption in 2010 (15.3%) and low growth in normal production (2.5%) led to very low stocks at the end of 2010, too little to cover seasonal production lows of early 2011.”This is exactly what led to the very high prices in early 2011,” he says.

The 2011 growth in consumption was 6.3% with relatively low growth in normal production (3.5%). This, he said, was responsible for low stock levels by the end of 2011 and again for high prices in 2012, repeating the 2011 developments. “However, prices are likely to decline afterwards,” he affirms. In the event of a scenario of higher growth in total rubber consumption in 2012, it will have a strong effect during 2012-13 because of the relatively tight market, which would then continue into 2013, according to him. On the other hand, a lower world-wide production, a reduction of 1%, will also have a strong effect on prices during 2012-13.

In fact, the 2011 prices were lower than what was estimated and expected in March 2011, mainly because of consumption growth slipping to 4% and production growth touching marginally above normal level in the wake of disasters in Japan and Thailand and lower growth in China. It may be noted that low planting during 1995-2003 led to very low growth in normal production during 2005-10, Dr Smit says

According to him, global NR normal production is estimated to reach 17.7 million tonnes by 2025, but the actual production may be higher or lower depending on prices. The growth in normal production in NR is likely to register a steep fall from a peak of about 7% in 2015 to below 1% in 2030 Global NR consumption is estimated to touch 11.40 million tonnes in 2012 from 10.92 million tonnes in 2011 registering a 4.4% growth. Meanwhile, normal production is estimated to clock at 10.72 million tonnes in 2012 from 10.27 million tonnes in 2011, also registering a 4.4% growth. Global NR consumption in 2020 is estimated to touch 16.7 million tonnes as against SR consumption of 20 million tonnes.

The set of consumption forecasts is apparently meant to describe a balanced future scenario, Dr Smit says. Of course, deviations will occur depending on developments in the world economy, he adds. The differences may be positive or negative. Meanwhile, the set of production forecasts may turn out to be on the high side in case of adverse weather conditions.

Consumption pattern

Rubber consumption for the tyre sector is related to  production of tyres via tyre weights by major types of tyres. The remainder of rubber consumption is for general rubber goods (GRGs). According to estimates, out of the global rubber consumption of 36.7 million tonnes (NR+SR) in 2020, tyres will account for 22.5 million tonnes and GRGs 14.2 million tonnes

Close to 60% of all rubber is used in the tyre industry while the balance is used for general rubber goods. Around 70% of NR is used in the tyre industry. Of the other 30%, about half is used for dipped goods

New planting estimates

In respect of new planting, during the year 2010 alone, Vietnam topped the list with 75,000 ha, followed by China (58,000 ha)
and Laos  (55,000 ha). Back in 2005, it was Thailand which topped the list with 123,000 ha, followed by China with 54,000 ha and Vietnam with 30,000 ha