×
Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday
×

Global rubber demand expected to drop 5%

Global rubber demand expected to drop 5%
Comment E-mail Print Share
First Published: Thu, Jan 15 2009. 10 28 PM IST

Stretching it thin: A worker taps a rubber tree for latex on a farm at Mundur, Kerala. Due to the slumping demand for rubber, auto makers globally have scaled back production, cut jobs and shut factor
Stretching it thin: A worker taps a rubber tree for latex on a farm at Mundur, Kerala. Due to the slumping demand for rubber, auto makers globally have scaled back production, cut jobs and shut factor
Updated: Thu, Jan 15 2009. 10 28 PM IST
Singapore: Global rubber consumption may drop as much as 5% in 2009, as the auto industry took the brunt of a worsening global recession, the International Rubber Study Group (IRSG) warned on Thursday, adding that demand may recover only in 2010.
Global auto makers have scaled back production, cut jobs and shut factories due to slumping demand, sending rubber futures to their weakest in six years in December and prompting main producers Thailand, Indonesia and Malaysia to trim exports.
Stretching it thin: A worker taps a rubber tree for latex on a farm at Mundur, Kerala. Due to the slumping demand for rubber, auto makers globally have scaled back production, cut jobs and shut factories. Prashanth Vishwanathan / Bloomberg
“This is the most difficult time in my life to make forecasts for the rubber industry,” Hidde Smit, secretary general of the Singapore-based grouping of key rubber producers and consumers, said. “We are not very optimistic, of course. We expect rubber consumption will shrink this year quite a bit. Our latest forecast is for a reduction by about 4-5% in 2009.”
IRSG, which compiles data and issues forecasts for global demand and supply, had initially projected a drop in demand of 3.3% for this year. It does not forecast prices.
Demand for natural and synthetic rubber shrank by 3% in 2008, compared with a forecast in November of 1.9% growth, but a recovery in 2010 may be possible, said Smit.
“In our analysis, we use data from the IMF (International Monetary Fund). In the last report in November last year, the IMF was quite optimistic for a recovery in 2010. If that would be the case, then in 2010 we’ll see a very strong growth in rubber consumption, maybe over 5%,” he said. “If, however, the recession continues for another year, then the growth in 2010 will be very small, maybe 1%. I am not so optimistic. I don’t think that 2010 will see a very high growth rate in the world economy.”
Last year, US auto sales fell 18% to about 13.2 million units from the previous year, hit by the economic downturn, and most auto makers expect sales to decline further in 2009. The figure has hovered just above 10 million on an annualized basis in the last few months.
IRSG pegged global rubber consumption at 21.2 million tonnes (mt) in 2009, down from 22.18mt last year. But consumption could rebound to 22.8mt in 2010, it said, depending on the state of the global economy. Natural rubber normally accounts for nearly 40% of global demand, while synthetic rubber—a petroleum product—accounts for the rest, data showed.
“(If) we have an extended scenario where 2010 will be as bad as 2009, then you’d see a prolonged low growth in the rubber consumption,” said Smit.
If 2010 turned out to be as bad as 2009, then next year’s consumption could only reach 21.6mt, he added.
In an effort to shore up prices, the three main producing countries agreed on 13 December to cut their rubber exports by one-sixth, or 915,000 tonnes, in 2009 to prop up prices.
Thailand, the world’s biggest producer, also plans to buy 200,000 tonnes of rubber from the local market.
“If you have a decline of so many percent in consumption, then in the production side, something has to be done as well,” said Smit. “Of course farmers react to lower prices by producing less, but any other activities may help as well. Whatever measures that people are taking, you always have to wait for what the effect will be.”
Tokyo rubber futures, which set the tone for physical prices, fell on Thursday after rising nearly 8% the previous session, to track weaker oil and other commodities.
Comment E-mail Print Share
First Published: Thu, Jan 15 2009. 10 28 PM IST
More Topics: Rubber | Recession | Thailand | Indonesia | Malaysia |