Rubber prices likely to remain high on robust demand

KUALA LUMPUR: Faster-than-expected global economic recovery and acceleration in the demand for natural rubber (NR) will likely keep rubber prices high in the short and medium term, said the Association of Natural Rubber Producing Countries (ANRPC).

The association said in its latest NR Trends and Statistics report that demand for rubber was strongly dependent on the global economic growth. “These fundamentals will likely continue to support rubber prices as growing demand may offset the post-wintering rise in supply.”

The International Monetary Fund in its revised World Economic Outlook report in late April had indicated a stronger-than-anticipated economic recovery. The world economy is expected to grow at 4.2% in 2010 against 3.9% projected in January and 3.25% in October 2009.

In addition, the high NR import and consumption in China, India and Malaysia in the first quarter of this year were clear indications of acceleration in NR demand.

“More than 45% of the global NR demand comes from these countries, which are the three major consuming countries in the ANRPC,” said the association. The ANRPC member countries represent about 94% of the global NR supply.

Malaysia, for example, posted an annualised 13.3% rise in consumption and 28.3% in NR import in the first quarter of this year.

“The country is in transition from an NR exporter to NR importer,” ANRPC said adding that Malaysia imported an estimated 183,500 tonnes of NR during first quarter of 2010.

Malaysia's dominant glove manufacturing industry looks set to benefit from the higher demand resulting from the US government US$940bil health bill.

According to ANRPC, NR demand would likely receive a further boost as a section of the tyre manufacturing industry would enter the market after April.

It added tyre manufacturing industry by and large, postponed purchases in March and April in expectation of comfortable supply availability after the wintering season.

For this year, global NR production is anticipated to grow by 6.2% to 9.4 million tonnes from 8.82 million tonnes, said ANRPC.

Yielding area is estimated to expand this year by 6,000ha in India, 23,000ha in Vietnam, 22,000ha in China and 10,000ha in Cambodia.

While biggest producer Thailand's 2010 hectarage data were not available, ANRPC said Indonesia's yielding area was estimated to have expanded marginally by 3,000ha .

As for Malaysia, due to severe shortage of labour, a section of smallholders does not harvest rubber unless “prices are highly favourable.”

ANRPC said an estimated 85,000ha of mature areas, left untapped in Malaysia, were opened for harvesting this year, thanks to favourable prices.

Factors that could affect rubber market in the coming months, after the end of the wintering season in April, include the age structure of existing yielding areas in major producing countries which could exert downward pressure on average yield.

In addition, the appreciation in the currencies of NR exporting countries versus the US dollar normally exerts upward pressure on prices of NR. “A stronger local currency compels exporters to raise the offer prices which are quoted in US dollar,” said ANRPC.

On the other hand, appreciation in the Japanese yen against the US dollar could push NR prices downward.

(biz.thestar.com.my)