A surplus in the global natural-rubber market this year will be 78 percent more than estimated in December as demand growth weakens and production in Thailand surpasses forecasts, according to The Rubber Economist Ltd.
The glut is seen at 652,000 metric tons in 2014, compared with 366,000 tons predicted in December, Prachaya Jumpasut, managing director of the London-based industry adviser, said in an e-mail. The surplus for 2013, previously estimated at 336,000 tons, was put at 714,000 tons.
The world output estimate for last year was increased 3.9 percent to 12.04 million tons from 11.59 million tons forecast in December because of a revision in production from Thailand, the largest grower, Prachaya said. Futures in Tokyo, the global benchmark, tumbled 21 percent this year on concern that production will exceed demand for a fourth year and consumption in China, the top buyer, will weaken.
“The picture of the global supply-demand has clearly changed as a result of the data revision,” said Prachaya, who’s studied the commodity for more than three decades. “We expect a continued weakness in the rubber sector in most of the major rubber-consuming regions this year.”
Futures on the Tokyo Commodity Exchange closed at 217.8 yen a kilogram ($2,131 a ton) yesterday. Prices tumbled to an 18-month low of 210 yen on Feb. 6.
The International Rubber Study Group expects the global surplus this year to exceed the 241,000 tons forecast in December and production will exceed 12.1 million tons as it revises the supply outlook for Thailand, it said last month.
U.S. Demand
“For China, recent data seems to point to a slower, or at best a steady, economic growth,” Prachaya said. “This and a slow economic recovery in her trading partners let us to believe that the growth of natural-rubber consumption in China to slow down this year.” Demand in the U.S. may “turnaround from a decline to a positive growth,” he said.
China’s economy expanded 7.4 percent in the January-to-March period, the weakest pace in six quarters, while industrial production trailed estimates, the statistics bureau said yesterday in Beijing.
Worldwide production will continue to outpace demand over the next two years, while the surplus will narrow as demand growth exceeds the pace of gains in output, said Prachaya. The global surplus is seen at 483,000 tons in 2015 and 316,000 tons in 2016, he said.
World output may rise 1.1 percent to 12.2 million tons this year, while usage expands 1.7 percent to 11.5 million tons, according to a quarterly report by The Rubber Economist. Demand may grow 4.1 percent in 2015 and 3.8 percent in 2016, it said.
Thai production may be 4.06 million tons this year from 4.14 million last year as dry weather curbs output and low prices discourage tapping, said Prachaya. Still, that compares with the previous forecasts for output of 3.74 million tons this year and 3.59 million tons in 2013.
Source: Bloomberg
