Upward pressure on rubber price likely

Rubber Aug 16, 2012 No Comments

RubberIn 2008, during the financial crisis, the price of rubber lost 56%. Facing this situation, Thailand, Malaysia and Indonesia, representing about 70 percent of global natural-rubber supply, agreed to withdraw 690,000 tonnes from the market. Rubber price surged more than 100% the following year.

Rubber plunged 43 percent in the past year and reached its lowest level in almost three years as growth slowed in China, the top consumer, and Europe. At the Tokyo Stock Exchange Tuesday, January harvest  was trading at 213,800 yen per tonne, the lowest price since October 2009. Same story at the Shanghai Stock Exchange, where January contracts were down to 21,150 yuan per tonne. Overall, rubber has lost nearly 27% of its value between March, its highest rate, and August.

So, after Indonesia indicated early July it was considering introducing a minimum priceThailand, Indonesia and Malaysia today signed an agreement to reduce their rubber supply by 450,000 tons. Practically, 300,000 tons will not be exported this summer and 16,000 hectares of aging trees will be cut. If history repeats itself, this should give a major boost to rubber prices.

The global economic downturn is to blame for the fall in rubber price since March. China for example, the largest trading partner countries in Southeast Asia, has seen its 2012 growth outlook lowered from 8% to 7.7%. As a result, its demand for rubber decreased 42% last year and could loose another 5% this year.

Japan, another major rubber consumer country, has seen its GDP increase by only 0.3% in Q2 and Japanese consumption remains sluggish. It only increased by 0.1% last quarter, even though it represents 60% of GDP.

The steps will have a positive outcome, moving rubber prices higher, said the chief secretary of the International Rubber Consortium Ltd.

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Pascal Blanc

Pascal has implemented numerous software solutions in the areas of procurement, sourcing, spend management, supplier evaluation and performance. His clients include Fortune 500 companies in Europe, Asia and North America. He is a co-founder of Source & Procure.

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