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Global rubber consumption may rise 12%

Source : BUSINESS_STANDARD
Last Updated: Mon, Jun 28, 2010 20:31 hrs

More demand, low supply may push prices to Rs 200 a kg from Rs 180 now.

Despite an estimated 6.2 per cent growth in global supply this year, the natural rubber (NR) market is poised for a strong bull run. The price of benchmark grade RSS-4 on Monday touched an all-time high of Rs 180 a kg. Both growers and traders here anticipate further rise in prices. They expect the price to touch Rs 200 a kg soon.

According to the latest consumption trend, global consumption may rise 11-12 per cent by the end of the year. There has been a huge fall in consumption in the West, especially the US. But, all leading Asian economies are consuming more rubber.


 
GAINING STRENGTH
Rubber production (in tonnes)
Country 2009 2010* % change
Thailand 3,164,000 3,240,000 2.40
Indonesia 2,440,000 2,592,000 6.20
Malaysia 857,000 1,000,000 16.70
India 820,000 895,000 9.10
Vietnam 724,000 770,000 6.40
China 646,000 680,000 5.30
Sri Lanka 137,000 142,000 3.70
Cambodia 34,000 49,000 43.90
Total 8,822,000 9,369,000 6.20
*estimated

According to latest estimates of the Association of Natural Rubber Producing Countries (ANRPC), the supply from the ANRPC region may rise 6.2 per cent this year after three consecutive years of stagnation or decline.

The estimated output for the current year is 9.37 million tonnes. The output growth in 2007, 2008 and 2009 was 0.2 per cent, nil and -3.6 per cent, respectively.

Sibi Monippally, general secretary, Indian Rubber Growers Association (IRGA), said it was unlikely that prices would decline as south-east Asian nations were increasing their inventories. The market was likely to be in a strong bull phase, he said.

Preliminary estimates from ANRPC indicate the demand from China, India and Malaysia will be strong. This is mainly due to a buoyant automobile market in Asia’s economies. NR consumption rose in the first four months of this year by 25.5 per cent in China, 11.7 per cent in India and 13.6 per cent in Malaysia on an annualised basis. In China, which accounts for 32 per cent global demand, the imports of NR and NR-rich grades of compound rubber rose 17.3 per cent during the period. China’s consumption is estimated to rise 10.2 per cent in 2010 to 3.35 million tonnes.

In Malaysia, imports rose 30.4 per cent during January-April. The country is estimated to have imported 253,000 tonnes during the first four months of this year as against 194,000 tonnes in the same period last year.

In India, consumption increased to 316,000 tonnes in January-April as against 283,000 tonnes in the same period of 2009. According to Sajan Peter, chairman, Rubber Board, India was at the second spot in consumption, surpassing the US in 2009-10, clocking 6.8 per cent growth.

Consumption in the US dropped 34 per cent due to economic turmoil, he added. There will be a deficit of 85,000 tonnes in production over consumption in 2010-11 in the domestic market according to the board. But, Peter says, there will be no problem in availability in the local market as there is an opening stock of 248,457 tonnes.

The gap in consumption and production would widen not only in India but globally too. Rubber Board estimates show consumption will rise 6 per cent in 2010-11 while production will rise 9.1 per cent. However, industry sources do not agree with this.

According to them, consumption will increase more than 12 per cent in the current financial year. So, it is the supply-demand inequilibrium that determines prices the world over. The sharp increase in consumption and imports by China seem to be major factors behind the surge in prices.

During January-April, China imported 602,000 tonnes NR and 344,000 tonnes compound rubber, while imports were just 37,000 tonnes. So, the rate of increase in consumption in the ASEAN region, China and India would determine the future course in the rubber mart.

The increase in consumption in this region outperformed the drop in the EU and the US, said experts.




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