Rubber Industry Embarks On A Difficult Road To Recovery

- Oct 31, 2020-

According to foreign media news on June 16, Thailand and other top rubber producing countries in the world are coming out of the worst quarter in a decade, but the road to recovery still looks fragile. Although the consumption of rubber glove manufacturers continues to rise, the demand from automakers, the traditional largest customer base, is still declining. At the same time, China’s restart of the economy has increased some optimism, but concerns remain in other parts of the world, including the United States.

   An analyst at Tokyo brokerage firm Yataka Shoji said that in the futures market, rubber prices fell by 27% in the first quarter, the worst performance since 2008, and since then they have risen by 14%. However, the spot market has not changed much because tire factories do not have enough demand. Prices cannot rise again because there is no demand. Many rubber factories, including those that supply large tire manufacturers Goodyear and Bridgestone, cannot sell spot goods and are forced to deliver to the futures market as an alternative.

   Due to the uncertain prospects, major rubber producing countries (Thailand, Indonesia, Malaysia) are implementing different countermeasures. Thailand chooses to use rubber as a raw material for roads and guide posts to increase domestic consumption; Indonesia believes that China's demand has helped, but total exports are still declining, and no recovery will be seen before the end of the year. Malaysia is betting that rubber gloves are its saviour.

   The following are the views of the major rubber producing countries on the rubber market:

  1, Kajohnjak Nuanphromsakul, Acting Director of Thailand-Thailand Rubber Administration

   The export of automobile tires has fallen, but the price of latex has rushed to the top of the film. The outbreak of the epidemic has increased the demand for concentrated latex, which is used to produce medical equipment, such as rubber gloves. Thailand is expected to export 3.7 million tons of rubber this year, down 5% from 2019. Although the leaf disease that damaged plantations last year has eased this year, there are still four provinces, which will reduce supply.

  2, Pattarapol Wongsasuthikul, CEO of Thailand-Thailand Rubber Group

   Globally, the supply into the market has dropped by about 10% in the past 6 months due to extreme weather in the rubber-producing countries. The drought in Thailand in March and April has reduced the output of glue when tapping.

  3, Zairossani Mohd Nor, Director of Malaysia-Malaysian Rubber Bureau

   The rubber industry in Malaysia is expected to grow by 6.5% compared to 2019 to reach 33 billion ringgits (approximately US$7.7 billion).

   Rubber glove exports plan to climb 15% to 20 billion ringgit this year. It plans to export 225 billion rubber gloves globally to increase its share of the global market from 62% to 65%.

   The export of natural rubber decreased by 10% due to the deceleration in demand, especially the decrease in demand from China in the first five months of 2020.

  The government is providing incentives to small growers to encourage rubber tapping, subsidizing costs, including making up the difference when the price drops to a certain level, and cash subsidies during the monsoon season.

  4. Moenardji Soedargo, President of Indonesia-Indonesia Rubber Association

  The shipment is delayed or cancelled, and there is no business relationship. If there is a recovery in the fourth quarter, it will be very prominent.

   Although the demand for rubber gloves is growing, the design of the Indonesian rubber industry does not have the ability to supply this sector.

  Malaysia has obtained a business opportunity from this epidemic, but for us, changing the industrial design is not something we can accomplish in one or two years.

   Rubber farmers are delaying rubber tapping because of low prices and low demand.