Chinese consumption to grow 10% in 2006.

The world's largest consumer of rubber, China, is expected to consume more than 5.5 million metric tons of rubber in 2006. This is an increase of over 10% on estimated figures for 2005, the International Business Daily (IBD) reported. The newspaper, which is affiliated to China's Ministry of Commerce, based the estimate on China's fast economic growth, and the huge amount of China's rubber-related exports.

Increasing infrastructure construction, accelerated industrialization, the improvement of people's living standards and more vehicle purchases have led to the continuous growth of China's rubber consumption in recent years, and the momentum will carry over into 2006, the newspaper said. Figures from the International Rubber Study Group (IRSG) show the country has doubled its consumption of rubber since 2000, when the country consumed 2.53 mmt.

IBD expects China's rubber output to grow more than 5% to 2.3 million tons, 1.7 million of which will be synthetic rubber, in 2006.

This year, China will import at least 3.0 mmt of rubber, an increase of 20% over 2005, it said, predicting continued high rubber prices in 2006.

The domestic rubber price could still drop during the year if China lowers the rubber import tariff, or if the international crude oil price falls considerably, IBD said.

It appears, if anything, that the price of oil could increase this year. The Economist Intelligence Unit (EIU) said in its latest report, "Crude oil prices have eased somewhat from their September peak, amid much speculation of 'demand destruction' and rising stocks. While usage has eased in Asia and North America, prospects for 2006 still remain healthy. However, prices are unlikely to surge much above $65/barrel. The annual average price for 2006 will therefore be little changed from the 2005 level of $55/barrel"

The EIU said its price index for industrial raw materials (IRM) is estimated to have risen by 9% in 2005. As for rubber, the price outlook is bullish. "After a robust year in 2005, the rubber market can now expect stronger demand growth in 2006, at the same time as supply prospects have weakened," EIU said.

Prices for natural rubber hit historical highs in India, and probably in most producing countries. According to the IRSG, the average price for RSS 1 was $1,230 per ton in New York in 2003, and in October 2005 the price was $1,937. The price for TSR 20 in 2003 was $1,120, and $1,801 this past November. The cost of a pound of butadiene in 2003 was $.297, and styrene was $.406, and in November of 2005 butadiene was $.51 while the latest figures for styrene showed the price at $.70 per pound in September 2005.

But the price for NR is rising much faster than synthetic rubber. In 2001, the price for TSR 20 was 52% of the price for styrene butadiene rubber SBR). In 2003, the price was almost 89% of the SBR price. In September, 2005, the price was 110.8% of the price for SBR, the highest ratio this decade. According to IRSG figures, the price for SBR 1502 was running 59% higher in November 2005 compared to the end of 2003.