[10 Dec] Thailand: Climate Change Expected to Push up Prices of Natural Rubber

Rubber prices are set to increase by as much as 30% next year as global demand rises on economic recovery and supply tightens amid climate change and the El Nino weather phenomenon, the Bangkok Post reports.

"Climate change is becoming a key factor and rubber supply could be cut further next year by unfavourable weather, meaning it would fail to meet rising demand as the global economy recovers," said Luckchai Kittipol, president of the Thai Rubber Association. "We are feeling upbeat that the rubber prices may reach 100 baht per kilogramme late this year or early next year."

Thai rubber smoked sheet is up by 40% year-on-year to 98 baht per kg. But Mr Luckchai expects an even more promising price outlook next year. "This year's flooding is the worst scenario and now we are concerned about next year's El Nino that could bring dry weather which could cut supply again," he said.

The World Meteorological Organisation (WMO) has warned El Nino weather, warming the Pacific Ocean and linked to drought in South Asia, is likely to continue into the first quarter of 2010.

Global rubber demand is forecast at 9.3 million tonnes next year, up from 8.69 million this year, with supply at 9.4 million tonnes, said Mr Luckchai.

Output in Thailand, Indonesia and Malaysia, which provide about 70% of natural rubber, is expected to drop more than 6% this year after flooding.

Thai rubber output is expected to be 2.9 million tonnes in 2009, down from 3.09 million in 2008. Indonesian output is forecast at 2.59 million tonnes this year, down from 2.75 million last year.Malaysia's output is expected to be 951,000 tonnes this year, down from 1.07 million in 2008, said the Association of Natural Rubber Producing Countries.

"We are now wondering whether the production of the three countries will drop further next year," said Mr Luckchai.

Thailand is expected to export about 2.6 million tonnes of rubber products this year, for between 170 billion and 180 billion baht, down from 2.7 million tonnes worth 220 billion baht last year.

Mr Luckchai said next year's outlook will largely reflect the world economy and its reaction to the Dubai World scare.

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(Source: irco.biz)