Songkhla, Thailand – Natural rubber (NR) major Sri Trang Agro-Industry Public Co. Ltd has reported a significant rebound in NR prices since February, but has questioned whether this recovery can be sustained.
Having hit its lowest level in almost seven years at the end of January, the NR market became “healthier and consolidated” as low prices limited both speculative activity and small players in the supply chain, Sri Trang said in a 13 May analysis of its first quarter results.
The Thai group also identified a “concurrence of several bullish factors” including concerns over the impact of El Niño on NR supply and the agreement to cut export by 615 kilotonnes (kt) by Thailand, Indonesia, and Malaysia during Mar-Aug 2016 and a more stable economic outlook in China.
These factors, combined with a rise in crude oil and other commodities prices, and the depreciation of US dollar have “fuelled a significant rebound of NR prices from its bottom by approximately 50 percent over the past few months.”
Sri Trang, however, went on to say that fundamental NR demand & supply is expected to remain unchanged as a pick-up in NR consumption could be offset by the expansion of NR production during this price-improvement period.
“In the medium to longer term, weaker economic recovery of developed countries, NR stock of the Thai government of more than 300kt, and uncertainty of US dollar movement as well as crude oil prices still weigh on NR outlook,” the group said.
For its part, Sri Trang achieved record sales volume at 363kt in Q1 2016, increasing revenue 15.0 percent year-on-year (YoY) and 7.9 percent quarter-on-quarter (QoQ). However, lower gains from hedging activities and higher selling expenses left the group with a net loss for the first three months of the year.
First-quarter sales of goods and services totalled Baht16,695 million (€416 million), up 15.0 percent YoY and 7.9 percent QoQ. While sales volumes rose by 35.0 percent YoY and 19.9 percent QoQ, average selling price fell 16.2 percent YoY and 10.3 percent QoQ. Sales volumes to China jumped by 75.7 percent YoY and 40.6 percent QoQ.
Gross profit for Q1 2016 was Baht817.3 million, down 21.4 percent YoY but 32.4 percent higher than in the fourth quarter 2015. First-quarter gross profit margin was 4.9 percent, up from 4.0 percent in Q4 2015 – helped by improved demand in March.
Sri Trang claims to be the world’s largest fully integrated natural rubber company with a market share of 10 percent of global consumption. The group offers a wide variety of natural rubber products, including TSR, RSS and concentrated Latex, with a total capacity of 1,400ktpa. It operates 27 rubber processing plants in Thailand and Indonesia.
The group’s gloves manufacturing operation is Thailand’s largest and the world’s top-five producer of examination gloves. It also claims to be Thailand’s largest producer of high-pressure hydraulic hoses for the industrial sector.