Wonder when raw material cost pressures will ease and tire prices will steady? Keep wondering, because it will be some time before that happens.
The acceleration in demand for tires in rapidly growing economies like China and India has led to a sharp increase in natural rubber prices over a sustained period.
Now, climatic conditions in major rubber supplying nations Thailand and Indonesia could prevent production upgrades, potentially leading to shortages and further price increases, according to estimates made by the Association of Natural Rubber Producing Countries.
The Bangkok Post reports that while global natural rubber supply increased by 6.3% to 9.4 million tons in 2010 – a rise that could not prevent the continuing rise in the cost of the commodity – “an extended winter and unpredictable rains” in Thailand, coupled with a drop in Indonesia’s harvest due to “unusual rains” will prevent any further rise in 2011.
An anticipated reduction of 815,000 hectares of rubber plantations in Thailand’s south will also contribute to a leaner 2011 for the country, though a planned expansion in the north of the country will see 870,000 hectares of rubber plantations begin to yield in 2012, after which production will rise.
The Post says senior analyst at the ANRPC Jom Jacob believes production in 2011 will equal that of the previous year due to increased output from other rubber yielding nations.
Meanwhile, the report suggests synthetic rubber could also be squeezed, with a global shortfall in the production of synthetic rubber monomer butadiene reported by the International Rubber Study Group. That group’s secretary general Stephen Evans is quoted by the Post, comparing the two aforementioned growing tire producing nations: “Indian synthetic rubber production is non-existent, unlike China, which has strategically built up huge capacities. In the past five years, India has only added 0.5 million tons of synthetic rubber production capacity.” (Tyres & Accessories)