Missing the bounce
By TA News Bureau
The growth forecast for global consumption of rubber in the coming two years is unlikely to be impressive due to worldwide economic uncertainty, says Dr Prachaya Jumpasut, Managing Director and founding member of the London and Bangkok-based consultancy Rubber Economist Ltd. He offers a pessimistic outlook for this year and next for rubber consumption. Amid the current sluggishness, he notes that the demand for synthetic rubber has grown faster than natural rubber for the first time in three years
London and Bangkok-based research and consultancy firm Rubber Economist says that it still harbours a pessimistic outlook for this year and next for global rubber consumption. The downward revision in world growth is mainly the result of lower estimates for Asia/Pacific and North America, says Dr Prachaya Jumpasut, the research firm’s Managing Director and founding member.
He notes that in 2015, the consumption of synthetic rubber grew faster than natural rubber for the first time in three years, but forecasts the opposite to happen for 2016-2018.
He expects that the decline for the next few years will bring the annual global average SR share to the lowest level since early 1960s. The slow growth in NR output is also expected to continue for this year before picking up next year, leaving average growth rates lower than recent experiences.
Dr Jumpasut projects relatively slow growth rates in major NR producing countries as compared to smaller producers for the next few years. Rubber consumption in the top two countries – China and the US – is struggling to show positive growth this year. America’s downturn might extend further into 2017.
In rest of Asia, the decline in South Korea consumption in recent years has been compensated somewhat by pick-up in the ASEAN countries, particularly Thailand, Indonesia and Malaysia.
The noted rubber economist says that the world NR acreage has increased sharply since the mid-2000s, adding another 4.13 million hectare to global production capacity, which has touched almost 14 million ha in 2015.
In contrast the SR output is anticipated to slow down this year before picking up slightly later. Nevertheless, the average annual growth is forecast to be below the historical trend. World SR capacity has also increased to almost 20 million tonnes in 2015 but not as sharply as for NR.
Dr Jumpasut’s view is that since the record surplus in 2013, NR production and consumption have been better balanced with a deficit followed by a surplus, a trend that may continue for a while.
World NR output increased from 12.4 million tonnes in 2014 to 12.28 million tonnes in 2015 showing a 1.2 per cent growth rate. This slow growth trend is expected to continue for the rest of this year before picking up next year.
The lower forecast of world production for this year was due to the downgrade of the outlook for the top producing country Thailand. While that is the case, Dr Jumpasut also predicts slower growth of around 3-4 per cent over the years to 2018.
He, however, points out that smaller producers in Asia, including Myanmar, Africa and Latin America, may continue to show a relatively sharper growth.
China, the world’s top rubber industrial country consumed about 33 per cent of global rubber last year followed by the US which took less than 11 per cent.
The average annual growth during 2016-18 is forecast at 2.4 per cent, well below the historical trend. Like consumption, slow growth in Asia/Pacific and North America caused weak world production in 2015 and 16.
While growth in Asia/Pacific is expected to improve in 2017 and 2018, for North America, there may even be a decline during 2016-18.
Nevertheless in 2018 the global NR stocks are expected to surpass the previous record that reached in 2014. For SR, after a small surplus and a deficit in 2012-2015, one could expect a relatively large surplus. His research projects that global SR stocks are expected to increase in 2016-2018 to reach another record level.
Stocks-to-consumption ratios for both NR and SR have been relatively stable recently and it is expected to change little during the next few years. NR prices declined in June then strengthened in July before declining again in August.
NR price is likely to show relative stability with the possibility of a gradual decline over the next few years. Following the trend of petroleum prices, SR prices have shown some improvements in 2016, Dr Jumpasut pointed out. Compared to NR prices, their recent differences are relatively small in contrast to early 2011 when NR price was more than double SR price.