According to a new story by Bloomberg Businessweek magazine, 2012 will bring “the biggest glut” of natural rubber supplies since 2004. With rubber plantations from Africa through Southeast Asia tapping a massive global crop, the magazine expects that tiremaker raw material costs will drop considerably.
The global NR market will see a “413,000-metric-ton surplus, from an 87,000-ton shortage in 2011 that helped drive rubber to a record in February,” according to a Goldman Sachs Group report.
The Bloomberg story said, “Output in Thailand may rise 8% to 3.7 million tons in 2012, according to Goldman Sachs. Indonesia will harvest 5.1% more at 3.1 million tons as supply in Malaysia remains little changed at 1 million tons, the bank said. The three countries account for 70% of (global NR) production.”
NR “prices fell since then on prospects for more supply and slower growth in China, the largest consumer,” the magazine reported. “Futures will drop as much as 12% to 240 yen ($3.12) a kilogram (2.2 pounds) in Tokyo this year, the lowest since November 2009, the median estimate in a Bloomberg survey of 14 analysts and traders shows.”
According to the report, a combination of economic readjustment (China’s inflation), natural disaster (Japan’s earthquake and tsunami) and the ongoing impact of the global economic meltdown contributed considerably to the downturn in many commodities, include NR. Just before the Japan disaster, NR hit “an all-time high of 535.7 yen per pound on Feb. 18 on the Tokyo Commodity Exchange,” according to Blooomberg, and then fell 49% to 272.7 yen per pound.
NR, in fact, was “the fifth worst-performing commodity among 80 tracked by Bloomberg in the past 12 months, behind two carbon contracts, rhodium and ruthenium,” the report said.
“World supply (of NR) will increase 7% to 11.8 million tons this year as demand rises 3% to 11.4 million tons,” according to a Goldman Sachs estimate. “Inventories among members of the Kuala Lumpur-based Association of Natural Rubber Producing Countries, representing about 92% of global production, will expand 12% to 1.45 million tons this year,” the report said.
NR stockpiles held by processors and traders in China “reached 365,600 tons by the end of December, compared with 46,100 tons at the end of July,” Bloomberg reported from an ANRPC Jan. 4 report. China accounted for 34% of global NR consumption in 2010, but fell off 1.3% in 2011. China demand, according to Goldman Sachs, may increase 5% to 3.77 million tons in 2012.
Even as anticipated global growth in auto and truck sales will boost demand for OE tires, “that may still not be enough to diminish the anticipated glut of natural rubber,” the Bloomberg story said.
And tire prices are still impacted by the cost of other raw materials, such as synthetic rubber, which is still pricey even after it “fell 38% to $2,750 a ton in the four months through the end of November, according to data from Sutton, Surrey-based ICIS, a petrochemical research company.”
Despite the downward trend in NR prices, tiremakers still claim they are “facing relatively high costs for synthetic rubber and have been unable to recoup all of the gain in raw-material prices last year,” according to the Bloomberg story.