The global surplus of natural rubber will shrink 46 percent in 2015 as demand expands and farmers reduce tapping because of decreasing prices, according to the International Rubber Study Group.
Production will outpace demand by 202,000 metric tons from 371,000 tons in 2014 and 650,000 tons last year, the Singapore-based body said in an e-mail on Aug. 13. The group said in May the glut this year would exceed the 714,000 tons in 2013 after it increased output estimates for Thailand, the biggest shipper.
Futures plunged 29 percent this year, declining to the lowest level in almost five years in June. Supply increased after record prices three years ago spurred output, while demand slowed as the pace of economic expansion decelerated in China, the biggest buyer. The glut is now contracting as profits decrease for small farmers who represent 80 percent of world supply amid forecasts for record global car sales.
“Small growers across producing regions have started responding to a consistent decline in prices,” said Lekshmi Nair, senior economist at the group. Farmers are showing less enthusiasm for tapping while tire demand is boosting usage, she said in the e-mail. The inter-governmental group has members from producing and consuming nations and industry.
Futures in Tokyo, the global benchmark, plunged to a five-year low of 190.3 yen ($1,858 a ton) on June 5 after reaching a record 535.7 yen in February 2011. The contract for delivery in January traded at 196 yen by 9:32 a.m. local time today.
Plentiful Supply
The global surplus will be 328,000 tons in 2015 from 514,000 tons this year and 644,000 tons in 2013, The Rubber Economist Ltd., an independent researcher, said in June.
“We don’t expect to see an end of ample supply,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said in an e-mail. “Demand growth will find it hard to catch up. We do not see a major scope for prices to recover.”
World inventories were 2.9 million tons at the end of 2013 from 2.26 million tons a year earlier, study group data show.
“The continued decline in natural rubber prices and a slower-than-expected recovery in global demand as well as increased supply have led to an inventory buildup,” Nair said.
Production from growers representing 93 percent of global output dropped 1.1 percent to 5.83 million tons in the first seven months from a year earlier, the Association of Natural Rubber Producing Countries said on Aug. 6. The group represents the top producers including Thailand, Indonesiaand Vietnam.
Global sales of light vehicles, weighing less than six tons, are set to climb 4 percent to a record 90.5 million units next year, according to LMC Automotive Ltd., a research company in Oxford, England. Sales across Asia will expand 5.4 percent in 2015, it said in e-mail.
World production will rise 2 percent to 12.275 million tons this year and increase to 12.635 million tons in 2015, the study group said. Demand will expand by 4.5 percent to 11.904 million tons in 2014 and grow to 12.433 million tons next year.
– Bloomberg
