Global rubber consumption at four year low.

Global robber consumption is estimated to have fallen back to a moving annual total (MAT) of 20.8 million metric tons, according to the International Rubber Study Group. This is the lowest level since May 2005. Year-on-year (YOY) consumption growth plunged to -12.3% by the middle of 2009; this compares to a low of-3.5% reached in March 2002, at the height of the last global economic downturn.

Global natural robber consumption is estimated to have declined by 0.2 mmt on an MAT basis between March and June 2009, with the rate of decline in consumption accelerating from -6.2% to -8.5% in YOY terms over the period. Global SR consumption is estimated to have fallen by 0.5 mmt over the same period, with consumption growth declining from -11.7% to -15.5%.

Global rubber output is estimated to have fallen from an MAT of 21.5 mmt in March 2009 to 21.2 mmt by the middle of the year, while the YOY rate of decline in production accelerated from -7.5% to -9.4% over the same period. However, the provisional data point to tentative signs of a leveling off in this trend in the final month of the period under review.

The decline in total rubber output in the second quarter of 2009 was due to a further steep decline in world SR output, which fell to an estimated MAT of 11.7 mmt in June compared to 12.2 mmt at the end of the previous quarter; over the same period, the rate of decline in SR production accelerated from 10.0% to -13.7% in YOY terms. Global NR production rose marginally from an estimated MAT of 9.4 mmt in March to over 9.5 mmt by the middle of the year, with the growth rate appearing to bottom out at -5.4% in May.

The International Rubber Study Group said the more pronounced decline in global consumption compared to global production has moved the NR market into modest surplus in the year to June 2009; this follows the deficits seen in the previous two calendar years. Global NR stocks are estimated to have remained at around one month's consumption over the past twelve months.

NR exports continued to fall in the first six months of 2009 across the major producers compared to the same period in 2008, except in the case of Vietnam. However, the rate of deceleration in exports was lower in the second quarter compared to the first. Chinese NR imports over the first half of 2009 increased by 19% compared to the same period in 2008, partly reflecting a rebuilding of manufacturers' stocks. However, imports by the EU, Japan and USA fell by 44%, 27% and 35%, respectively, over the same period, reflecting the continuing slump in demand.

The inexhaustible rise in SR exports was halted in 2008 as the bottom fell out of world demand; exports peaked in July at an MAT of 7.82 mint, before crashing down to 7.23 mint by the end of the year, falling further to 6.36 mmt by June 2009. Focusing on the five most significant importers, import volumes over the first six months of 2009 have fallen in all countries, even China, although the volume of Chinese imports was greater in the second quarter of 2009 compared to the same period a year ago (up by 19.8%), indicating that at least in one country the appetite for SR is growing again.

NR prices continued to maintain their up trend from June 2009 to the end of August. Prices increased by 21% in August over their June level, reaching the highest rate of the year at U.S. $2.10 per kg at the end of the month. The up trend is partly supported by fundamental factors, as well as improving market sentiment concerning an easing in the global recession; physical prices also advanced, tracking the surge in futures prices. NR latex prices broadly followed the same trend as solid NR prices, albeit at a lower rate of change. The price of light crude continued to move upwards, gaining more than U.S. $7/barrel in a little over three months to U.S. $68.05/barrel in early September, or a 20% gain over May-August. And, in a further twist, the huge spike in the monomer price was not fully translated downstream to synthetic rubber; in Asia, prices of SBR and BR were up 13% and 21% in July over their April levels, and were U.S. $1,485/mt and U.S. $1,610/mt, respectively. In the U.S., prices settled at 91 cents/lb, and 108.2 cents/lb, for SBR and BR, respectively, in August.

The latest data on export volumes of selected latex general rubber products (GRP) from the four leading exporters suggest that the overall downward trend of the industry may have eased further still over the second quarter of 2009. The further easing was led by the two largest product sectors by volume, medical gloves and other gloves, and does not reflect any real changes to the underlying strength of demand for latex products, but appears to be industry specific, responding to the increased demand in the wake of the global swine flu alert.

There have been upward revisions to the world total rubber consumption for the two forecast years, which reflect the changed assumptions and conditions of the tire and non-tire industries, and now the IRSG expects 2009 demand to shrink by 6.5%, followed by a 6.2% recovery in 2010. The split of total rubber consumption into NR and SR demand sees a better outlook for the latter in 2010, compared to the previous forecast, sharply revised upwards by 6.1%. The projection for NR consumption has been revised downwards in 2009, while holding still for 2010. World NR production is projected to fall by 4.8% in 2009, with Thai output forecast to fall by 3.9%, while production in Indonesia and Malaysia is expected to decline by 5.9% and 9.2%, respectively. In 2010, with higher GDP growth and an improving outlook for prices, global NR production is forecast to reach almost 10.1 mmt, a rise of 7.0%.