Rubber output in Thailand, Indonesia and Malaysia will drop more than 6 percent in 2009 after unusually heavy rains caused flooding, an industry group said on Monday, raising the prospect of a price rally to last year's peak. Tight supplies blamed on bad weather have pushed up cash prices by more than 10 percent in the past month, with benchmark Thai RSS3 grade now hovering around $2.75 a kg -- within sight of a 56-year high of $3.25 struck last July.
"Climate change has become an issue of serious concern on the supply potential of natural rubber. Unpredictability of climate limits the scope for developing and popularising region-specific new clones," said the Association of Natural Rubber Producing Countries.
"Apart from a fall in yield, even the traditional rubber growing regions in major producing countries are gradually being rendered unsuitable for growing rubber."
Output in the three main producers, which account for 70 percent of global output, could slip to 6.45 million tonnes in 2009, down from the October forecast of 6.62 million and lower than 6.91 million estimated last year, according to the group.
The ANRPC, which collects output data from member countries, also groups India, Vietnam, China, Sri Lanka and Cambodia.
"It's possible for the price to go up to $3 sometime next year. Let's say by February, the market can have a chance to move higher because people will be looking at the wintering season," said a dealer in Thailand's southern city of Hat Yai.
Torrential rain in Thailand's southern region since early November has caused flooding in several areas, including Hat Yai in Songkhla province, which has been declared a disaster zone.
Around 800,000 hectares (2 million acres) of rubber land has been hit by rain and flooding, which has disrupted tapping and hampered transport, said dealers.
Supplies are likely to shrink further early next year during the dry wintering season in Thailand, the world's largest producer, as trees shed leaves and latex output falls.
Prices of rubber sheet, the raw material for RSS3, have doubled from $1.10 per kg in December 2008, the lowest in nearly seven years, due to steady demand while supply was cut by unfavourable weather in Thailand, Indonesia and Malaysia.
"Rubber plantations in Thailand's southern region and the north of Malaysia have been badly affected by flooding caused by torrential rains throughout November," said the ANRPC.
"This indicates the possibility of a substantial downward revision in the production anticipated for November 2009 and for the year 2009," it added.
Thai rubber output was expected to fall to 2.9 million tonnes in 2009, down from a previous forecast of 3.07 million in October and lower than 3.09 million tonnes in 2008.
Production in Indonesia was forecast at 2.59 million tonnes this year, higher than a previous estimate of 2.52 million, but down from 2.75 million tonnes estimated last year.
Malaysia's output was pegged at 951,000 tonnes this year, down from a previous forecast of 1.02 million, and lower than 1.07 million tonnes in 2008.
Tyres account for around 70 percent of global demand for natural rubber, which is also used to make condoms and gloves.
ANRPC production trends ('000 tonnes)
| | 2005 | 2006 | 2007 | 2008 | 2009 |
| Thailand (1) | 2937 | 3137 | 3056 | 3090 | 2900 |
| Indonesia | 2271 | 2637 | 2755 | 2751 | 2594 |
| Malaysia | 1126 | 1284 | 1200 | 1072 | 951 |
| India | 772 | 853 | 811 | 881 | 827 |
| Vietnam | 482 | 555 | 602 | 663 | 650 |
| China | 541 | 538 | 588 | 548 | 640 |
| Sri Lanka | 104 | 109 | 118 | 129 | 133 |
| Total | 8233 | 9113 | 9130 | 9134 | 8696 |
| Source: Reported by respective governments. Note: (1) Production for the year 2009 as anticipated in November. | |||||
(Source: irco.biz)
