This action might not be possible to undo. Are you sure you want to continue?
November 25th 2011
FROM THE ECONOMIST INTELLIGENCE UNIT Demand Growth in global demand for natural rubber (NR) is likely to be constrained by weak growth in the US and the euro zone. As a result, the Economist Intelligence Unit expects global consumption to grow by just 2.9% in 2012. Although this is an acceleration compared with growth in 2011 (when consumption rose by an estimated 2.3%), it is only a modest upturn, and almost entirely owing to the recovery in Japan²the natural disaster that hit Japan in March 2011 caused considerable disruption to global automotive production (the main source of global rubber demand). Although Japan is returning to normality, a vigorous recovery in global automotive demand has been ruled out by the general slowdown in economic growth in Western markets. In addition, severe flooding in Thailand since October has not only caused major disruption to carmakers in that country, a leading exporter in Asia, but also at automotive manufacturing plants in Japan and in North America, owing to a shortage of parts produced in Thailand. The risks to the outlook are firmly to the downside; if the economic outlook were to deteriorate further, automotive demand would be particularly hard hit. In 2013 we expect only marginally stronger growth in global NR consumption, of 3.4%, based on our central forecast of a general improvement in the global economy. Consumption growth in China and India will remain sluggish In China, which is by far the world's largest consumer of NR, real GDP growth is forecast to slow to an annual average of 8.4% in 2012-13, down from 9.1% in 2011. Growth in vehicle sales is estimated to have slowed in 2011, to 8.4%, having soared by more than 30% in 2010, but sales are expected to pick up again in the next two years, growing by an annual average rate of nearly 14.5%. The slowdown in 2011 was primarily attributable to disruption to supply chains caused by the Japanese disaster that resulted in a fall in vehicle production in China in the following few months, and there has not yet been a strong recovery. With the continued substitution of NR with synthetic rubber (SR)²reflecting high NR prices²and somewhat slower economic growth, we estimate that NR consumption growth in China eased to 4% in 2011, compared with growth of 7.7% in 2010. We expect demand growth to remain at around 4% per year in 2012-13, but there is a risk that the pace of growth will be slower during the forecast period² concerns persist over the potential for major disruption in China's overheating economy, with a bursting of a bubble in the property sector the most likely trigger. India's economy has been growing almost as rapidly as China's, and real GDP growth of around 8% annually is expected to continue in 2012-13. In 2010 NR accounted for 70% of total elastomer usage²even more than in China. However, substitution is also eroding demand (NR accounted for 74% of rubber consumption in 2009). Growth in NR consumption in 2010 was a relatively weak 4.3%, despite a rise in overall rubber demand by almost 10%. Consumption growth will remain relatively subdued, at around 4.2% a year in 2012-13. Floods in Thailand create further disruptions to car makers The disaster in Japan in March 2011 had a significant impact on the country's economic
In early October Toyota announced that it was scaling back production at Japanese factories for the third consecutive week and suspending overtime in the US. to 33%.792 985 2012 3.1% in 2013. but it appears to have held up better than in the euro zone. with consumption growing by 3%. this weighed heavily on global demand.1% in 2011.953 1. as car exporters were feeling the pressure of weak global demand and a strong yen. But the economic recovery is stuttering.646 944 2011 3. The recovery in production was more vigorous than in Japan.025 2013 4. Most of the overseas facilities of Japanese automotive companies saw output fall because of a back-up in the supply chain of crucial components. Continued demand for cars in developing Asia will support rubber demand growth of 4. with demand set to rise by only 1. the euro zone crisis is weighing on stockmarkets and economic confidence. a lack of demand had made it unlikely that Japanese carmakers would run their factories much above normal production levels once fully operational. For example. Despite high NR prices. but there will be no sustained period of accelerating growth. however. as the euro zone slips back into recession. Honda has eliminated overtime in Japan and is running North American factories at half capacity. Production in the fourth quarter is also likely to have been held back by supply-chain problems created by the flooding in Thailand. We still expect North American NR demand to rise by an average of only 1. There is also a serious risk that escalation of the sovereign debt crisis could severely undermine the euro zone economy. Domestic demand was also weak. as pent-up demand had largely been fulfilled. Natural rubber: consumption ('000 tonnes unless otherwise indicated) 2009 China India 3. Demand in the EU and US will be constrained by weak economic activity Growth in EU demand for NR is estimated to have slowed to just 2% in 2011. in Thailand automotive production fell by 50% month on month in April. the crisis left firms facing shortages of electricity and disrupted transport and supply chains. In 2012 we expect a rebound in Japan's demand.5% year on year in September 2011. developing Asia was the region most severely affected by the supplychain disruption caused by the earthquake and tsunami disaster. Although recovering in the following few months.2% a year in 2012-13. Outside of Japan.8% in 2013. vehicle production was still down by 6. Car production in October was up by 21% year on year. China and India) to grow by just 1.123 1. Given that Japan is the world's fourth-largest consumer of NR. there was an increase in the proportion of EU rubber demand met with NR consumption in 2010. with motor vehicle sales plummeting by 46% year on year in April. If NR prices remain relatively high.activity. Despite reasonable US GDP growth in the third quarter. Usage will not return to its pre-global recession level during the forecast period. while vehicle sales were up by almost 9%.384 905 2010 3. it is likely that NR's share will fall in 2012-13. Growth in North American demand for rubber slowed in 2011 from the rapid rate seen in 2010. As well as causing massive damage to the north-eastern coast. despite an improvement in demand in 2013.069 . and we forecast that demand will in effect stall in 2012. with an expansion of 3. but the flooding is likely to have severely curtailed production in the fourth quarter. before a reasonable recovery in 2012.1%. but even without these latest disruptions. We estimate that Japan's NR consumption contracted by 4% in 2011. with vehicle production up by 28% year on year in September. There may still be some effort to make up for lost time in early 2012. We expect rubber demand in Asia (excluding Japan. Vehicle production in Japan was down by almost 60% year on year in April.
000 ha of rubber . but rubber plantations are concentrated in the south of the country.3 750 2. Download the numbers in Excel Supply Assuming there is no major weather disruption in the leading producer countries. which represents rubber producers in Thailand.8% in 2011.Japan Other Asiaa EU Other Europe b North Americac Latin America Africa World d % change a 636 2.325 -8.389 1.9% a year on average in 2012-13.1% in 2010. Economist Intelligence Unit.201 1. the world's largest producer of NR. We estimate output growth of 3% in 2011. as it was hit less severely than other South-east Asian countries by adverse weather associated with La Niña. However.347 2. c Canada and the US. We expect growth of 4.6 720 2. Some rubber producers may delay the replacement of aged trees in a bid to maximise short-term production and take advantage of high prevailing prices.027 2. and we expect it to expand by an average of 6. for investment to pay off: newly planted rubber trees take seven years before they become productive.295 1. and forecast that growth will average 4. d Totals do not add. a global weather pattern that causes unseasonal weather conditions. Good monsoon rains support output in India In India. owing to rounding.7% a year in 2012-13. Governments in these leading producer countries are eager to support this growth.071 613 101 10.225 1.777 15.6% a year in 2012-13. has been hit by severe flooding since October. although production is still estimated to have grown by 7. Indonesia and Malaysia. up from an estimated 4. away from the flooding in the northern and central provinces.045 831 176 790 485 93 9.132 225 1. Production in Thailand has not been affected by the floods Thailand. unseasonable rains did hit Indonesian rubber producers in 2011.103 642 116 11. however. According to the Indian Rubber Board.735 3. However.9 755 2. the world's fourth-largest NR producer. Output growth in Indonesia will be reasonably strong The main impetus behind global NR production growth in recent years has come from Indonesia.155 236 1. It will take time. Medium-term prospects for Indian rubber production are promising.1%. we expect an increase in NR production of 5. Such intervention could involve asking producers to restrict exports. given that current prices for NR are historically high (despite recent declines) and that there are robust prospects for future demand growth in emerging Asia. Indonesia's NR production grew by 12. good monsoon rains in rubber-growing areas resulted in production rising by an estimated 4.092 628 109 11. NR supply growth will eliminate the global shortfall in 2012. has warned that it may intervene if prices fall too steeply amid intensifying concerns over the state of the euro zone and the global economy.177 242 1.6% in 2011.3 742 2.4 Including Australia. Sources: International Rubber Study Group (IRSG).154 232 1.1% a year on average in 2012-13. The Association of Natural Rubber Producing Countries reported in early November that the flooding had not had a significant effect on production. b Including the former Soviet Union. the International Rubber Consortium.118 657 124 11. which it still expected to have increased in 2011. Thailand. Indonesia and Malaysia. 14.
132 979 841 . government policy could also work against growth in rubber production: a minimum price for cocoa was recently introduced in an effort to reduce the number of farmers who are switching from the production of cocoa to rubber because of its relatively high price. Production in Côte d'Ivoire could still be affected by labour shortages Rubber production in Côte d'Ivoire has been undermined by the political crisis that engulfed the country in early 2011. production in Malaysia recovered at a reasonable rate in 2010. and rubber farming is more labour-intensive than palm oil cultivation). although Statistics Malaysia reported strong production growth in January-August.000 ha of existing plantations and plant another 300.164 2.7bn (US$37. We estimate growth of 7.336 1. Vietnam's rubber output continues to rise Production in Vietnam is forecast to rise by 3.930 1. The government is also committed to expansion of the country's rubber-producing capacity. high prevailing rubber prices are encouraging the planting of more trees (although the seven-year gap between planting and production means that there will be no sudden sharp increase in supply). since many workers fled rubber-producing areas during the post-election violence.012 890 780 2012 3. In early 2011 the government issued a request that farmers stop making way for the planting of rubber trees by destroying other crops. The Indian Rubber Board is investing around Rs1.8% a year in 2012-13.252 2.000 ha under cultivation. the production level will remain well below its previous peak in 2006.513 3. constraining growth. we expect production to rise by an average of 3.440 856 820 724 2010 3.736 939 851 755 2011 3. We expect production to expand by an average of 4.000 ha by 2018. are now becoming productive. but the rapid growth of domestic consumption is encouraging investment in the sector.068 935 810 2013 3. However. By the end of the 12th Plan it hopes to bring an additional 60. Malaysia's rubber industry continues to suffer from labour shortages After falling by over 20% in 2009.000 ha of rubber plantings in Cambodia by the end of 2011.664 3.8m) in expanding rubber cultivation during the government's 11th Five-Year Plan (2007-12). The mediumterm growth prospects are promising. assuming that there are no further political eruptions. maize and cassava. but the level of production remains well below that of 2008 owing to a combination of adverse weather and labour shortages (tapping is generally less remunerative than industrial employment. The government is aiming to renew 300.5% a year in 2012-13. As in many other countries. such as tea.trees. However. has led the Vietnam Rubber Group to invest in rubber plantations across the border in Cambodia. Natural rubber: production ('000 tonnes unless otherwise indicated) 2009 Thailand Indonesia Malaysia India Vietnam 3. which were planted seven years ago. combined with competition for land with other crops. However.135 1. however. China is only the sixth-largest producer of natural rubber in the world. and growth in 2012 could still be affected by a shortage of available labour. It expects to have cultivated 50. The opportunity for profit.4% a year in 2012-13.8% in 2011 and forecast robust rates of annual expansion in 201213. These problems continued to affect production in 2011.350 2. Government policy is.
will continue to constrain prices over the coming years. which has disrupted automotive production.China Côte d'Ivoire Brazil Others World a % change a 644 203 129 722 9.325 377 1. Sources: IRSG. but the shortfall is estimated to have narrowed as the Japanese natural disaster and weak global economy hurt demand growth. Economist Intelligence Unit.4 2011 10.4 weeks in 2010. which will weigh on demand. with SMR20 spot prices in Kuala Lumpur averaging M$13. On an annual average basis.6 2012 11.519 7. combined with healthy growth in NR production. improvements in supply in 2013 will contribute to a continued recovery in stocks in that year. before stabilising in 2013. The market remained in deficit in 2011. to 6.1 9.469 11.000 tonnes. RSS1 will follow a similar trajectory. Global sufficiency fell to an estimated 7. The deteriorating economic performance in developed markets. Natural rubber: stocks and prices . in 2011.037 5.902 10. down from M$12. Economist Intelligence Unit. In New York.000 tonnes. year-end.469 5.526 7.6 weeks. as investors became more risk averse.898 11.740/tonne a month earlier. In 2012 we expect the market to return to a surplus.777 -376 1.397 6.821 8. stocks.2 752 252 144 937 12. Download the numbers in Excel Stocks and prices Global stocks of NR fell in 2010 as demand outstripped weather-constrained supply. while leaving rubber-producing areas largely unscathed.702 9.6 Includes International Natural Rubber Organisation (INRO) stockpile disposals after 1999.2 665 227 132 844 10.0 b 2013 12. Sources: IRSG. More recently. prices will drop by 21% in 2012.027 -129 1. but on an annual average basis they will have risen by an estimated 29%.037 11.709/tonne.898 4.347 122 1. Prices have also been under pressure owing to general concerns about the crisis in the euro zone and the poor outlook for the global economy.0 Rounded to nearest 10. Spot prices fell particularly sharply after the earthquake and tsunami disaster in Japan in March²a decline that mirrored a more general fall in commodity prices.735 302 1.401 7. before rising in 2012 and 2013.255/tonne.8 720 243 140 905 11. prices have been hit by the flooding in Thailand.702 -4.2 690 235 136 875 10. On November 4th the price stood at M$11. with an estimated global deficit of 376.401 10. and we expect it to fall further. Global closing Download the numbers in Excel Natural rubber prices will fall as market balance improves After soaring in the first quarter of 2011 rubber prices were on a declining trend for much of the remainder of the year. On the assumption that weather conditions remain benign. Natural rubber: supply and demand ('000 tonnes unless otherwise indicated) 2009 Supply Demand Balance Stocks b Weeks' consumption a a 2010 10.
500 1.2 4.709 29.893 0.700 1. US$/tonne.0 c 6.7 10.340 4.363 -18.519 8.659 9.700 10.523 1. Economist Intelligence Unit.420 4.142 9.021 5.928 13.000 10.607 13.700 10.452 3.8 1.250 1.7 1.398 0.821 19. M$/tonne.000 10.500 5. Sources: IRSG. SMR20 spot prices.615 67. b RSS1 spot prices.640 3.526 -19.900 13.400 10.400 4.815 3.390 4.980 - '000 tonnes.657 13.700 - 3.400 1.850 10.2 11.878 80.605 4.400 4.5 1.416 1.331 37.800 10.300 1.5 15.602 5.000 10.9 4.400 11.920 11.397 -8.350 1.370 4.2 4. Download the numbers in Excel The Economist Intelligence Unit Source: World Commodity Forecasts .250 1.800 10.2010 Stocks a 1 Qtr 2 Qtr 3 Qtr 4 Qtr % change Prices New Yorkb 1 Qtr 2 Qtr 3 Qtr 4 Qtr Year % change Kuala Lumpurc 1 Qtr 2 Qtr 3 Qtr 4 Qtr Year % change a 2011 2012 2013 2014 1.380 4.350 1.550 1.800 -21.9 1.340 4.200 4.781 1.8 10.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue listening from where you left off, or restart the preview.