DRAFT Stocks levels to keep lid on NR prices

Natural rubber (NR) prices are likely to remain under pressure throughout 2019, despite trends that led consumption to outstrip supply of the commodity last year.

Current low pricing levels reflect “excess supply” which is pushing up global NR stocks for a third consecutive year, according to a 12 March quarterly report in The Rubber Economist.

“The picture is not expected to change much over the next few years and surplus may continue with stocks rising to reach 4.9 million tonnes by 2021,” said the report edited by Dr Prachaya Jumpasut.

This will likely impact NR prices, as the relative stock/consumption ratio has not risen to as high as in the past, the report added.

Weather conditions, currency movements and speculation in the futures market can have temporary impact on prices, the analysis went on to note.

However, it concluded, global economic problems, the growing importance of smaller and lower-cost producing countries and the hangover of global stocks are likely to keep prices on “a gradually declining trend.”

According to the Association of Natural Rubber Producing Countries* (ANRPC), world production of natural rubber registered a 4.6% year-on-year increase to 13.960 million tonnes in 2018.

While still reflecting growth, the figure indicates a slowdown in supply from the previous year, when the Association reported a year-on-year increase of nearly 7%.

In its 2018 ‘natural rubber trends and statistics’ report released this February, ANRPC linked the slowdown to rubber farmers who “left their plantation untapped and moved for other jobs.”

The trend, it suggested, was a significant factor behind decreases in production of 18.9% in Malaysia, 9.5% in India and 2.1% in Sri Lanka during last year.

Thailand remained the top rubber producer in 2018 with a 9.2% increase in output to 4.85 million tonnes, followed by Indonesia at 3.77 million tonnes.

Non-ANRPC countries posted 1% growth in production, at 1.75 million tonnes overall.

Global demand for NR, however, rose 5.2% to 14,017 million tonnes for the year – significantly higher than the 1.4% level recorded in 2017.

A 6.8% rise in demand – amounting to 9.229 million tonnes – recorded by ANRPC members contributed to the increased consumption rate.

Representing 75% of total ANRPC consumption, China and India led the market, with 5.6 million tonnes and 1.2 million tonnes of demand respectively.

Unlike 2017, last year also saw a shortfall of 57,000 tonnes in natural rubber supply.

Rubber prices

Generally, over the year, the price of NR witnessed a steady decline across all Asian markets, despite a small recovery in December, which has continued into 2019.

The prolonged slide in prices (see panel) has now prompted Thailand, Indonesia and Malaysia – members of the International Tripartite Rubber Council (ITRC) – to announce a new round of export cuts which will come into effect in April.

The three countries announced 5 March that they would cut exports of the commodity by 240,000 tonnes over a four-month period, to address the “prevailing depressed NR price level.”

ITRC has maintained that the NR market is led by “misperception over the data inaccuracy despite a healthy balance of market fundamental.”

* ANRPC member states produce more 87% of global natural rubber and include Bangladesh, China, India, Indonesia, Malaysia, Myanmar, Papua New Guinea, the Philippines, Singapore, Sri Lanka, Thailand and Vietnam.