Analysts say natural rubber prices may rise further by December.

Natural rubber prices may keep rising over the rest of 2005 on continued strong demand from tire companies when supply has been limited in most producing countries, according to analysts. High oil prices which will raise the price of synthetic rubber will also keep natural rubber prices high.

"So far in 2005, natural rubber demand globally has outstripped the rise in supply, leading to higher rubber prices," said the managing director of a major Thai rubber company.

"Besides, Thai rubber output won't return to normal levels until mid-December, when monsoon rains are expected to cease. This will ensure natural rubber prices remain high the next three to six months," he said.

The price of Thai ribbed, smoked sheet, grade 3 or RSS3, for instance, has risen 44% since the beginning of 2005 to around $1.70 per kilogram.

Thai natural rubber output in 2005 is expected to be around 2.97 million tons, down from 3.01 million tons in 2004, according to data from the country's Agriculture and Cooperatives Ministry.

Production in Malaysia, the third biggest producer in the world, also looks set to fall in 2005.

Malaysia's rubber output is expected to fall 2% to 1.14 million tons this year, the government said in its annual economic report. The decline has been attributed to a reduction in plantation acreage.

However, Indonesia, the second largest producer of the commodity, may see a slight rise in output to 2.25 million tons this year, up from 2.07 million tons in 2004, according to the Indonesian Rubber Association, or Gapkindo.

Higher prices have prompted farmers to take better care of plantations which were literally abandoned when global rubber prices plunged in 2002, said Suharto Honggokusumo, executive director of Gapkindo. "Tapping rubber trees becomes a more rewarding job now," he said.

But supply will remain tight as Typhoon Damrey, which ravaged plantations in China's key producing province of Hainan, may limit China's domestic production this year, analysts said.

According to some estimates, the typhoon could cause a drop of 50,000 metric tons of Chinese natural rubber production this year. Supply from Hainan constitutes 60% of China's total output, with the province producing a record 230,000 tons in 2004.

While rubber supply in major producing countries is expected to show little growth or even register a decline in some cases this year, consumption is rising amid increased demand from tire makers in the U.S., China, Japan and India.

According to the recently-released annual economic report of the Malaysian government, "the price of natural rubber is expected to remain strong in consonance with the higher price of synthetic rubber following rising world crude oil prices and increasing demand for natural rubber in China and Germany, particularly in the tire industry."