Natural rubber prices may rally after 2022

11:14' AM - Friday, 28/12/2018

Indian natural rubber producers will have to wait for a few more years to get better prices for natural rubber (NR) as the current demand-supply fundamentals along with other factors do not favour a recovery in prices during 2019, according to an international rubber expert.

Jom Jacob, senior economist at The Association of Natural Rubber Producing Countries (ANRPC), an inter-governmental organisation of major global rubber producers, said in his speech at the ongoing India Rubber Meet in Kochi that though consumption will outstrip supply next year, the potential to increase production under favourable price and weather conditions will keep the prices down.

Natural rubber prices have been moving in the lower range in the past few years in India, tracking the global trend, triggering more imports into the country.

He said the production potential factor is anticipated to stay unfavourable for prices up to 2022. As the new plantations and replanting have declined from 2013 because of plunge in prices, considerably fewer number of trees will be opened for tapping from 2022 taking into account seven-year gestation growth period of trees.

He also warned that unlike in the earlier price fall phases, the current one has seen a shrinkage in productivity, which could make rubber cultivation unviable for small growers. In the absence of alternative avenues, the small holders will be forced to reduce further investment.

“The world production of NR is anticipated to grow at 5.8% to 14.696 million tonnes in 2019 if NR prices continue at the current level. The global consumption is expected to grow at 3.6% to 14.730 million tonnes. The consumption in China is likely to be affected by the high US tariff," Jacob explained.

Other factors influencing the NR prices are the US dollar and crude oil rates. The dollar is likely to continue its rising trend, which could keep NR prices down as there will be outflow of speculative funds from Asian commodities.

NR prices rally on the speculation of substitution of petroleum-derived synthetic rubber with NR when oil prices rise. “But the speculative players are now aware of the abnormally high NR inventory at designated warehouses of Shanghai Exchange and as such they don’t perceive any shortage even if substitution takes place from SR to NR," Jacob said. - Economic Times -

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