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IRSG Forecast:: Rubber Consumption Will Decline

3/10/2009 - Global rubber consumption will fall 6.4 percent in 2009 to 20.73 million metric tons (mt), according to the International Rubber Study Group, which forecast a bigger drop than the 5 percent it had previously forecast. Rubber consumption could recover in 2010 to 22.04 million mt, which would be a rise of 6.3 percent from 2009. Global carmakers have scaled back production, cut jobs and closed factories due to declining demand, causing rubber futures to dip to six-year lows in December, and prompting rubber producers in Thailand, Indonesia, Malaysia and Vietnam to cut exports. In January, the IRSG placed global rubber consumption at 21.2 million mt for 2009, down from 22.18 million mt in 2008. Natural rubber consumption in 2009 is forecast to drop 2.3 percent from 2008 to 9.24 million mt, or 44.6 percent of the total consumption, according to the IRSG report. With the world economy heading towards recession, the decline in global rubber consumption accelerated in the final quarter of 2008. Between September and December, total global consumption declined by over 1 million mt to a moving annual total of 22.2 million mt, while the year-on-year growth rate plunged from 2.1 percent to -4.1 percent, a more abrupt fall in consumption than that seen in the 2001-02 global economic slowdown. Global natural rubber (NR) consumption declined by over 0.3 million mt between September and December, with consumption growth reversing from 2.1 percent to -3.4 percent over the period, while global synthetic rubber (SR) consumption fell back by approaching 0.7 million mt, with consumption growth moving from 2.0 percent to -4.7 percent. Global rubber production was 22.7 million mt in 2008, compared to 23.3 million mt in 2007, following a pronounced decline in output in the final quarter of 2008. The decline is attributed to a sharp reduction in world SR output, which fell below 12.8 million mt in 2008 compared to output of over 13.5 million mt in 2007; in the last quarter of 2008, production growth plunged to -5.6 percent from 1.0 percent in the previous quarter. World NR output reached 9.9 million mt in 2008, an increase of 0.2 million mt compared to 2007; production growth only started to slow in the final two months of the year, although it was still running at around 2.0 percent at the end of the period. With lower consumption and higher output in 2008, the global NR balance is estimated to have moved to a surplus of 392,000 mt from a deficit of 157,000 mt in 2007. SR consumption and production are estimated to have fallen abruptly (by -4.7 percent and -5.6 percent, respectively) in 2008 compared to 2007, in contrast to growth rates of over 6 percent seen in the previous year. Estimated global rubber stocks rose modestly in actual terms, but more steeply in relation to the level of consumption, at the end of 2008. NR prices recovered in mid-December 2008, after plunging 65 percent from their peak recorded price in July 2008. Prices continued tracking crude oil prices over the fourth quarter of 2008 and into early 2009. A combination of the global economic slowdown, a deepening slump in the global auto industry raising concern over demand, and continuing low oil prices augurs badly for the market. NR latex prices followed the same trend as solid NR prices. The price of light crude fell to its lowest level in over five years to US$31.41/barrel in late December 2008, before making a slight recovery and remaining, since then, range bound with a US$45/barrel ceiling. Displaying a time-lag in some markets, butadiene prices fell continuously in the three months to February. Ultimately, the upstream producers felt the impact of the falling cost of feedstock, along with the reduction in demand, and prices of synthetic rubber fell to their lowest level since 2004 in the first quarter of 2009. The overall downward trend in export volumes of selected latex general rubber products (GRPs) from the five leading exporters may have eased over the fourth quarter, mainly due to a deceleration in the negative growth rates of exports of other gloves from China and Thailand. NR latex consumption was stable in 2008 compared to the previous year, while Malaysian and Thai NR latex production decelerated by 16 percent and 8 percent, respectively.

International Rubber Study Group
www.rubberstudy.com

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