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The rubber economist.

Third quarter highlights show mixed results

According to the Third Quarter 2012 Rubber Economist report covering natural (NR) and synthetic rubber (SR):

* World rubber consumption may show only marginal growth this year before it picks up later.

* Worse than expected trends of consumption are predicted in all regions except Asia, which has been recovering recently.

* With similar growth rates for both NR and SR, the global SR share may remain steady for now.

* Despite a declining price this year, world NR output may show a similar growth rate to last year.

* Compared to NR, SR output is expected to respond to the slowdown in its demand more rapidly.

* There is a possibility of a contrasting trend between NR and SR stocks for the next few years.

* The appreciation of the U.S. dollar has been an important factor influencing the movement of NR prices, including its recent decline.

* Taking into account currency movements and the stocks to consumption ratio, NR prices may recover towards the end of this year and next year.

* There have been similar movements of declining prices for SR and other commodities this year.

ITRC action unlikely to affect NR prices

In August, the three members of the International Tripartite Rubber Council (ITRC), i.e., Thailand, Indonesia and Malaysia, announced their plan to boost natural rubber (NR) prices by cutting 300,000 metric tons of exports and to accelerate replanting of 100,000 hectares of trees (which they said would reduce the output by 150,000 metric tons). If the plan is fully implemented it would help to increase prices. However, the problem is that while the price has declined from its peak of almost $6/kg, it still remains historically high and attractive to the majority of farmers. The prices are attractive to farmers in many Asian countries who have been increasing their planting since the price started to rise in the early 2000s. The output from these countries has been increasing rapidly in recent years (figure 1). Global output has been increasing not only from these countries, but also from output outside the ITRC, such as from Vietnam and Sri Lanka (figure 2). The influence of increasing output from these latter two countries has partially come from the increasing competitiveness of their weak currencies relative to the currencies of the ITRC countries (figure 3). So, the conclusion is that the action by ITRC alone is unlikely to result in an increase in NR prices.

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Dr. Prachaya Jumpasut is the managing director of The Rubber Economist, a quarterly analysis and forecast of the industry. The Rubber Economist is a registered limited company in the U.K. and is incorporated under the Companies Act of 1985. Please email info@therubbereeonomist.com for more information.
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Author:Jumpasut, Prachaya
Publication:Rubber World
Date:Nov 1, 2012
Words:466
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