Rubber prices could increase on short supply
Limited natural rubber supply creates major price concerns for buyers
By Dave Hannon -- Purchasing, 11/7/2007 7:17:00 PM
As global demand for natural rubber outpaces the supply and oil prices continue upward, natural rubber prices could see a significant increase in 2008, according to some market watchers
Bloomberg reports that natural rubber futures in Tokyo, the global benchmark, climbed to the highest in 16 months as crude oil reached a record, raising investor demand for commodities as a hedge against inflation. Rubber for April delivery rose as much as 2.6% to $2,741/metric ton.
"There is no single piece of evidence to foresee a decline in the price (of rubber). All factors are favorable for an increase in price," said Jom Jacob, senior economist of the Association of Natural Rubber Producing Countries in a recent Reuters report.
Demand for rubber is very high from emerging regions like China, which imported 1.6 million metric tons of natural rubber last year and is already ahead of that pace slightly in 2007, importing 1.2 million metric tons in 2007.
“Chinese rubber imports will probably pick up as rubber production in China seasonally declines toward the end of the year,” Jun Nishimuta, an analyst at Kanetsu Asset Management Co. in Tokyo told Bloomberg.
But the supply of natural rubber plants is limited by how much the growers in Thailand, Indonesia and Malaysia can plant each year. And issues such as labor costs, weather-related issues and lack of workers in some of these regions could cause natural rubber supply to tighten through 2012, Jacob said.
Takaki Shigemoto, an analyst at Tokyo- based commodity broker Okachi & Co. says rubber output in Thailand specifically has slowed as rains disrupted plantation work, while reduced yield from old rubber trees also contributed to the decline in output.
“Thailand did not promote replanting of rubber trees in recent years, leading to a decline in yield,” Shigemoto told Bloomberg.
However, not all market experts see reduced supply coming. Chairil Anwar, director of the Indonesian Rubber Research Institute, said at a conference in Singapore in late October that Indonesia’s rubber output will increase more than 5% next year.
Now Playing:
Rubber prices are exploding
10/10/2005Rubber demand to drop this year
03/18/2009Natural rubber pricetags are now surging
03/01/2004
