Diminishing supplies.

It wasn't that long ago that the rubber consuming portion of this industry was turning a deaf ear to the pleas of the natural rubber producers who wanted to prop up depressed prices. The producing nations (mainly Thailand, Indonesia and Malaysia) were fearful, and rightfully so, that the low prices would force rubber growers to switch to more lucrative crops. Those that didn't switch would put off planting new rubber trees.

Now, in the midst of historical highs for pricing of NR, we realize that the latest round of historical low pricing wasn't such a boon to the consumers. Because new planting was delayed, an NR shortfall of 250,000 metric tons this year will grow to 840,00 by the end of the decade. It's hard to see where the impetus for any price rollback, short of a recession, will come.

Substituting more synthetic rubber could be a short term remedy. But if the feed source for the synthetics remains oil, we're heading down the wrong road. The recent force majeurs imposed on various products should be enough to make us rethink that strategy.

In the past, if either NR or SR pricing went too high, the other would be substituted, the old "competition in the marketplace" paradigm to keep prices competitive. The problem with this paradigm and the rubber industry is that the materials not only compete with each other, but the industry is competing with other industries for the use of these materials. Rubber plantations have a variety of agricultural options they can substitute, and petroleum derived synthetic rubbers can be pushed further down in the pecking order when supplies get tight. And if you're paying attention to projections of growth, specifically China and India, tight supplies are here to stay, unless there is a major emphasis by the rubber consumers to increase the rubber supply.

The consumers should be working with the producing countries to set up a fair and equitable system that will encourage more growing, fair wages to growers and eliminate the roller coaster pricing. Research and development of alternative types of natural and synthetic rubber should be accelerated. Michelin's recent work on a South American leaf blight resistant rubber tree is very encouraging. The ramifications of being able to grow rubber in the Amazon again would do wonders in alleviating future shortages.

The problem with future shortages in this industry is that they can be made less severe or eliminated if there is more cooperation between the consumer and producer.