Archive for October 6th, 2010

NATURAL RUBBER

Natural rubber and the different types of synthetic rubbers are used in many different end-products. The most important is the tyre sector taking about half the total consumption. Currently, the only commercially important source of natural rubber is latex cultivated from the Heve a brasiliensis tree.


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Global production and consumption

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Thailand is the largest natural-rubber producer and exporter in the world followed by Indonesia and Malaysia, which together produced almost 70 percent of the natural rubber in the world. Other important producing nations are India, Vietnam and China.

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According to International Rubber Study Group global natural-rubber production is forecast to rise by 6.1% to 10.25 million tonnes in 2010 and by a further 7.3% to 11.0 million tonnes in 2011. But currently the world is headed for a shortfall in production due to rains and floods in the rubber-growing region of Thailand and Indonesia.

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Global rubber consumption reached 23.1 million tonnes in the twelve months to June 2010, 11.2% higher than at the same point in 2009, reflecting a recovery in the demand for vehicles and tyres. Global natural-rubber supply fell back in the second quarter of 2010, with production growth slowing from 4.9% to 3.5%. Global natural rubber demand is expected to be around 114,000 tonnes higher in 2010, at 10.3 million tonnes, compared to the previous forecast. According to Goldman Sachs Group Inc. consumption will outpace supply by 127,000 tonne, the most since 2007.

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China is the biggest importer of natural rubber followed by USA and Japan. General Administration of Customs reported that China’s natural rubber imports in August rose 4.9% from a year earlier to 158,589 metric tons.

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Production and consumption in India

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India is the fourth largest natural-rubber producer and second largest consumer. According to Rubber Board estimates, India is likely to produce 8.93 lakh tonnes of rubber in the current fiscal. During the April—August period of the current fiscal, the production of rubber increased to 2.97 lakh tonnes from 2.74 lakh tonnes in the same period last year. Rubber cultivation in India has been traditionally confined to
hinterlands of southwest coast. Kerala and Tamil Nadu together constitute the traditional rubber growing regions in the country. Kerala alone contributes 91% of the total rubber produced in India . Tyre makers constitute about 60-70% of the total rubber consumption in India.

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Correlation of Rubber and Crude Oil Prices

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There is a 91% correlation between rubber and oil prices from April 1998 to the recent period. Petroleum is used to produce the bulk of the synthetic rubber. Rubber prices have surged from around `2000 per quintal in April 1998 to `14,000 per quintal in October 2009, while crude prices have shot up from around USD 20 per barrel to USD 80 per barrel by October 2009. This shows astounding relativity between the global
economic indicator and rubber prices.

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Current scenario

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The global economic recovery and growth in China are powering demand for rubber products. World auto sales, propelled by Chinese demand, will increase 8 percent this year. In domestic market, since January 2010, tyre makers have already raised prices by 10-14 percent in four stages. A hike in March was due to the increase in excise duties, while the others were due to the rise in natural rubber costs.

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According to Rubber Board, the monthly average natural rubber (RSS-4) prices have gone up 75 percent year-on-year in August to `17952/quintal. Around the same time in 2009, the costs were at `10250 /quintal. From `13772 /quintal. in January 2010, rubber prices reached a high of `18900/quintal in July 2010.

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