IRSG looks to refine NR, SR forecasting

Rubber and Plastics News Staff

Qingdao, China -- To more clearly project global rubber production and demand, the International Rubber Study Group needs to have a better understanding of the interaction between natural and synthetic rubber and their relationship with the energy markets, according to the group's secretary general.

Stephen Evans, speaking 17 March at the World Rubber Summit and fifth annual China Rubber Conference in Qingdao, said that currently in forecasting rubber production, the group's models assume there is unlimited monomer feedstock availability and manufacturing capacity available.

“There needs to be much greater sophistication and much greater interaction between the economics of NR and SR and the feedstocks to get a much greater clarification -- not on the total rubber demand, which came from the application area, the analysis, but on the interaction between NR and SR,” he said.

Evans made this observation as he presented attendees at the Qingdao meeting with the IRSG's predictions for NR and SR through 2020.

Using its vintage or traditional forecasting model, the IRSG predicts global rubber consumption will increase 47.1 percent to 31.5 million tons by 2020 from 21.4 million tons in 2009. Of that, NR will account for 14.6 million tons and SR 16.9 million tons.

Tyres will consume 19.4 million tons of rubber in 2020 and general rubber goods 12.1 million tons.

Based on the International Monetary Fund's projection of 3.1-percent growth for the global economy in 2010, Evans said the IRSG sees NR consumption rising 9 percent this year to 10.4 million pounds, after declining 6 percent the year before.

To achieve this increase, he said, “we would have to see a pretty weak El Nino effect, a short wintering, and we would have to see the price that we've got stimulate the (rubber tree) tappers, the smallholders, to actually go out and do the job and produce the rubber.”

Through the rest of the decade, the IRSG sees annual NR growth of between 3 and 5 percent.

Evans also said that between 2005 and 2008, in response to pricing and a positive outlook on the rubber industry, “there was a dramatic increase in the total new planting” of natural rubber trees in the Asia-Pacific region with more than 1 million hectares added.

The consequence of this is that by 2015 there will be 30 percent more NR available globally than in 2008 and 50 percent more by 2020.

More NR plantings

In addition, he suggested there could be another surge in new plantings for natural rubber, as a result of the current high market prices. The possibility of this happening is not fully reflected in the IRSG's supply forecasts, he said.

As for consumption of synthetic rubber, Evans said demand should pick up in 2010, after down years in 2008 and 2009, increasing 18.1 percent to 14 million pounds.

But with oil prices forecast to rise as high as $160-$180 a barrel by the end of the decade, Evans said there is less growth opportunity for SR “because synthetic has less flexibility to be competitive with expensive oil and feedstock costs.”

Also affecting synthetic rubber, besides the price of oil, is the growth in gross domestic product.

GDP drives general rubber goods, and general rubber goods on average are made using 75 percent synthetic rubber versus 25 percent natural rubber, Evans said.

“Therefore, there is a selective pull-up of synthetic rubber by the rapid growth (in GDP in 2010), but then as time goes by synthetic rubber is less competitive, and, on that basis, natural rubber takes up the momentum it already had in the past,” he said.

Evans also stressed the importance of understanding the dynamics among oil, butadiene and synthetic rubber going forward and incorporating these in the group's forecasting models.

Recent market experience has shown that as the price of oil rises, petrochemical crackers are moving more toward using gas as a feedstock. This switch to gas results in less butadiene production, which could lead to supply constraints.

“And why am I concerned about this and going on and on about it?” he said. “Well, frankly, the oil projection out of the (U.S.-based Energy Information Administration) is that things will go up and up.”

Today, he said, the situation is not “hugely significant” because the price of oil is not that high. “But as the oil price marches up and up and up, we need to take control of our destiny.”

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Rubber and Plastics News (a Crain publication)