The natural rubber (NR) shortage and the recovery in the global economy have brightened prospects for the industry this year and these will boost global demand.
The top-producing countries — Malaysia and Thailand — experienced the shortages due to the prolonged rainy season which disrupted output.
The International Monetary Fund (IMF), in its World Economic Outlook October 2016, said based on the global economic scenario, which was estimated to grow at a faster rate of 3.4% this year, the shortage will be at 350,000 tonnes this year.
“The expected NR supply deficit is expected to be more severely felt during the period up to May 2017 as seasonal factors will affect the overall supply,” IMF said.
Malaysian Rubber Board (MRB) said the prolonged rainy season in Malaysia and the floods in the world’s largest NR producer, Thailand, will also push up the prices for the product, which was vital for tyre production.
“The prices in Malaysia, especially the SMR 20, had breached its five-year of 1,005.5 sen since its highest of 1,139 sen in Jan 26, 2013,” it told Bernama.
It said the prices will continue their uptrend this year, driven by the recovery in the crude oil market, supply concerns and renewed expectation of a US-led global economic recovery.
MRB said the global NR consumption growth this year was projected to increase marginally by between 1.9% and 2.3% as demand increased in the region in line with a modest improvement in economic growth.
It said the NR usage will be supported by ongoing expansion in the global vehicle fleet, low prevailing prices and, in some cases, the need to re-stock,” it said.
It said according to the World Rubber Industry Outlook published by International Rubber Study Group in June 2016, the global total NR demand in 2017 was expected at 12.73 million tonnes and production 12.78 million tonnes.
“The production level is expected to give some positive sentiment to the rubber market and average NR price for 2017. It is estimated to increase slightly due to more favourable market conditions,” it said.
The board said demand for NR will also be supported by the positive revised global economic outlook by research firms, estimating the growth to be at 3.1% this year compared to 2.9% projected previously.
Giving an example, it said, the euro-zone and United Kingdom economic growth had been revised upwards this year.
On the local front, MRB said, demand for rubber and rubber products this year was expected to increase marginally with export earnings set to perk to RM33.5 billion from RM31 billion in 2016.
MRB said the NR production this year was estimated to increase by five per cent year-on-year to 680,000 tonnes.– Bernama