(Business Standard report)
Kochi, India – Serious concerns are being raised over prices on the natural rubber market, as a glut is expected this year too, owing to weak demand from China and other major consuming nations.
According to the Business Standard, Tokyo rubber futures dropped around three percent and sank to their weakest level in more than five years on lingering concerns over high inventory and drop in demand in China.
Global oversupply has dragged on the benchmark contract, pushing down nearly 30 percent so far this year at TOCOM. The global market is also worried about the high stocks in China, Thailand and Vietnam. Although the rubber inventory in China has dropped in recent weeks to below 160,000 tonnes, stocks in the bonded warehouses remain high at around 360,000 tonnes, according to dealers’ estimates.
In addition to the high stocks in China, the market is also under pressure from Thailand’s plan to sell 200,000 tonnes of state rubber stocks, although the current political crisis there was likely to delay the sale. There were no clear estimates for the inventory in Vietnam, but the country has overtaken Malaysia as the world’s third largest producer, raising the risk of a price war.
Global supply is forecast to exceed demand by 241,000 tonnes in 2014, a fourth straight year of glut, according to the International Rubber Study Group (IRSG). Meanwhile, the slump in natural rubber prices is spurring Southeast Asian farmers to turn to other crops. Output growth in top producer Thailand could halve this year, while in neighbouring Vietnam farmers have cut down trees and reduced tapping. Asia accounts for about 90 percent of the world’s natural rubber output.
Rubber prices have sunk roughly 30 percent this year and hit five-year lows on persistent worries about slower economic growth in the main consumer, China, and oversupply. Global supply is forecast to exceed demand by 241,000 tonnes in 2014 for a fourth year of glut, according to IRSG, which ruled out any near-term rebound in prices.