Natural rubber prices are expected to continue up this summer as demand increases in world markets while output may be limited.
Futures for summer delivery of natural rubber used to make tires and gloves are up 1.5% this week to $1.46/kilogram on the Tokyo Commodity Exchange because of forecasts of strong 2010 demand. And, with supply tightening from key producing nations, analysts say prices could go as high as $1.51/kg for August deliveries.
The Association of Natural Rubber Producing Countries says the global natural rubber market has entered a "demand-driven bullish phase" according to Bloomberg, as buyers led by China boost imports to meet rising tire demand. China is the world's largest rubber consumer and economists believe that country could maintain the 40% growth rate for tire demand it achieved last year.
However, the rubber producers' association, which represents countries accounting for 94% of global rubber production, cautions that a world supply target of 6% growth in may not be met because of drought in major producing nations. And now, an Indonesian producers' group warns that output for the natural rubber may decline this year.
"The March scenario is very different from what was forecast earlier and there will be some negative impact on output because of the drought," Jom Jacob, senior economist at the rubber producers' association, tells Bloomberg. "Demand is very high in major consuming nations."
Expansion in output may be limited by "the severity of drought" in major producing countries, Jacob says. Production may gain to 9.54 million tons this year, according to a survey of member countries early this month-which is much lower than an International Rubber Study Group forecast of as much as 10.6 million tons.
"Preliminary estimates of imports and consumption in January and February for China, India and Malaysia are clear evidence of buoyant demand," the rubber producers' association said. Chinese imports of natural rubber surged 63% in the first two months of this year, while Malaysia boosted imports by 34%.
However, output from Indonesia, the second-largest producer, may drop to 2 million metric tons this year from 2.4 million in 2009, the Rubber Association of Indonesia now says. That definitely will happen if unfavorable weather persists into the second half after rains disrupted first-quarter tapping, Asril Sutan Amir, chairman of the Rubber Association of Indonesia, tells Bloomberg.
Meanwhile, production last year in Malaysia shrank 20% to 860,000 metric tons as heavy rainfall hurt tapping, Bank Negara Malaysia says in a report, confirming earlier preliminary data. Malaysian output this year may rebound 17% to 1 million tons, Minister for Plantation Industries and Commodities Bernard Dompok tells Bloomberg, but only if the weather improves.
source - http://www.purchasing.com
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