Kochi: International rubber prices are likely to see a correction soon and settle at a price lower than the current $3 (about Rs128) a kg, as supply outstrips consumption in a slowing global economy, according to industry experts.
With the threat of recession looming large in many countries, growth in total rubber consumption is expected to decline to 2.6% in 2008 from 6.4% in the previous year, said Hidde P. Smit, secretary general of the International Rubber Study Group, or IRSG, an inter-governmental body monitoring the global rubber industry.
Smit and other industry experts were in India for an international rubber summit in Kochi on Saturday.
The slow growth in consumption is expected to continue next year as well, after which supply will overtake consumption as production is expected to continue growing steadily at about 2.5%, Smit added.
IRSG’s studies forecast global rubber production of 13.6 million tonnes (mt) by 2020, when consumption is likely to be 13.1mt, he said.
Replantation of rubber estates undertaken by various countries is likely to give a push to rubber production.
India is expected to produce 918,000 tonnes of rubber in 2009-10, up from 874,000 tonnes in 2007-08, while consumption is expected to increase to 922,000 tonnes from 853,000 tonnes,according to the Rubber Board, a government trade promotion body.
Sang Udomjarumani, chief executive of International Rubber Consortium Ltd, an inter-ministerial group of Indonesia, Malaysia and Thailand set up to ensure fair and remunerative income for small holders of rubber plantations, said farmers will enjoy good prices for the next four to five years at well above $2 a kg.
However, prices could fall in the long term because of declining consumption, he added.
Global recession, a fall in business travel, and slowdown of the Chinese economy after the Beijing Olympics would contribute to a fall in the consumption of natural rubber, he cautioned.
Udomjarumani also blamed the increasing use of alternative fuels, which would bring down the price of synthetic rubber made from petroleum products.