Thailand: Optimistic Outlook For Natural Rubber Prices

- Oct 09, 2020-

According to Thailand’s September 11 news, the outlook for natural rubber prices is improving. This is due to a sharp increase in the demand for protective rubber gloves due to the new crown pneumonia pandemic and limited market supply.


Luckchai Kittipol, Honorary President of the Rubber Association of Thailand, said that he is more optimistic about the prospects of rubber, because the price of RSS3 rubber reached 60 baht per kilogram for the first time in more than a decade on September 1.


He said that in the past, Thailand's rubber production was mainly concentrated in RSS grade rubber, which was used as a raw material for manufacturing automobile tires. The new crown pneumonia pandemic has driven the recent surge in demand for protective rubber gloves, driving rubber manufacturers to shift their production to latex used to make rubber gloves. Thailand’s latex production this year is expected to account for 30% of total rubber production, compared with 20% last year.


Thailand is the world's largest producer of natural rubber. The country's rubber production in 2019 was 4.8 million tons, of which rubber exports were about 4 million tons.


In addition, Thailand is also the world's fourth largest exporter of rubber products, second only to China, Germany and the United States. In 2019, rubber exports amounted to 11.2 billion US dollars, an increase of 2%. The main markets include the United States, China, Japan, ASEAN and Australia, where automotive tires account for 51% of shipments, followed by synthetic rubber and rubber gloves, which account for 19% and 11% respectively.


The Thai Ministry of Commerce reported that in view of the coronavirus pandemic, the global market for protective gloves has surged in demand, driving Thailand's rubber glove exports to increase by 38.5% year-on-year to US$959 million in the first seven months of 2020. The country's main export of rubber gloves The markets include the United States, China, Japan and the United Kingdom.


In 2019, Thailand produced more than 20 billion rubber gloves, and exports accounted for 89% of the total output. In 2019, Thailand earned 1.2 billion U.S. dollars in revenue from rubber glove exports. The country is the third largest exporter of rubber gloves after Malaysia and China.


Luckchai Kittipol said that Thailand's natural rubber production this year is estimated to remain at about 4.5 million tons, and exports between 3.8-3.9 million tons. The main reasons for the decline in production were increased rainfall and labor shortages, most of which came from Myanmar and Cambodia.


The collapse in natural rubber prices is another reason for the decline in production because it discourages farmers from planting and tapping rubber.


Since 2017, the price of natural rubber has been falling, mainly due to oversupply in major rubber producing countries. The weakening of the global economy subsequently reduced demand from the automotive industry, which hurt rubber producers.


The reason for the decline in rubber prices is also the growth of rubber plantations in Cambodia, Laos, Myanmar and Vietnam (CLMV) over the past decade. At present, the rubber supply of these four countries accounts for about 5.3% of the global total. At the same time, China, the world's largest rubber consumer, has also increased its rubber imports from the above four countries to meet domestic demand.


The Association of Natural Rubber Producing Countries (ANRPC) recently predicted that due to the new crown pandemic that has suppressed demand and plunged the industry into crisis, global natural rubber production may fall by 4.9% this year to 13.149 million tons, and global consumption will drop by 8.9% year-on-year to 12.544 million tons.


Luckchai Kittipol said that since the Ministry of Transport of Thailand has decided to use natural rubber to install obstacles on roads nationwide, it is expected that domestic rubber consumption will increase from 800,000 tons in 2019 to 900,000 tons. He also suggested that the government of this country should further promote the consumption of natural rubber to maintain domestic prices and reduce excessive dependence on exports. At present, the country's rubber exports account for as much as 80% of the total output.


He said that many investors in China, Germany and Japan are interested in investing in Thailand, such as rubber gloves and tire industries, but the current epidemic is the main obstacle to their investment.