The International Rubber Consortium (IRCo) — comprising representatives from Thailand, Indonesia and Malaysia — has forecast a reduction in the supply of natural rubber (NR) for the global market amidst strong sentiments for its demand.
It cited the La Nina phenomenon which is expected to bring heavy rains from November 2017 to January 2018, affecting the production of NR as well as the rubber wintering season beginning in the last quarter of 2017 that is also expected to further reduce the supply of NR for the global market.
“Given the current supply and demand situation of NR, the prices are not reflective of market fundamentals,” said IRCo Chairman Mesah Tarigan along with all BoD members from IRCo.
IRCo said there are strong sentiments favouring the demand for NR such as an improved global GDP growth rate in 2017 which is projected at 3.6% compared to 3.2% in 2016 (based on IMF data of October 2017).
It also noted that the improvement of automobile sales in major markets i.e China, EU and Japan which grew by 4.8%, 3.7% and 7.1% respectively during the first three quarters of 2017 compared to corresponding period in 2016, which had a direct impact on the demand for NR for the production of tyres. [source: European Automobile Manufacturers Association, China Association of Automobile Manufacturers (CAAM), Autodata Corporation, Reuters and Japanese Automobile Manufacturers Association (JAMA)].
In addition to that, we see better market situation for other commodities such as the strengthened crude oil prices and other commodities as indicated in NYMEX and GCSI Commodity Index.
Meanwhile, there is increasing usage of NR by Thailand, Indonesia and Malaysia for the construction of their roads and highways.
“The three Countries will collectively monitor and consider measures to strengthen NR prices, taking into account that the majority of rubber planted areas are managed by smallholders and any reduction in prices has a direct impact on their income and welfare,” said Mesah.