Global natural rubber market to flourish

The world total rubber consumption decreased to 25.7 million tonnes on a moving annual total (MAT) basis in September 2012, from 25.9 million tonnes on a MATbasis in June 2012.

However,the world total rubber supply continued to increase, but at a decelerating rate, growing by 1.2 percent in September 2012, measured on a MATbasis. The world NR supply expanded to 11.3 million tonnes in September 2012 by 3.0 percent, measured at a MATbasis.

Also, the world total natural rubber (NR) consumption decreased in the same period in 2012 by 1.3 percent year-on-year (YOY) to 10.9 million tonnes in September 2012 on a MATbasis, while the world synthetic rubber (SR) consumption fell by 0.2 percent (YOY) to 14.8 million tonnes over the same period.

The result was the lengthening of the NR and SR markets in the twelve months to September 2012, with production outstripping consumption by 436,000 tonnes and by 206,000 tonnes on a MATbasis, respectively.

NR physical market prices fell by 20 percent between January and November 2012. Without significant changes in the weakening state of the global demand, the NR prices remained in the downward trajectory, irrespective of the upward correction seen during the September-October period. With reported increase in stockpiles in China, the implementation of the Agreed Export Tonnage Scheme (AETS) by the three major producers had little impact on prices in the 4th quarter under the overall ‘bearish’ NR market environment
The continued economic uncertainty in the developed economies and possible hard-landing in China has led to the development of three scenarios in the latest outlook of the global rubber industry. The three scenarios are based on different possible world economic outlooks for 2013-2022 (Table 1):

The IMF Scenario

This was developed using the comprehensive world economic outlook of the International Monetary Fund. The data were extracted from the latest World Economic Outlook (WEO), which was released in October.

Scenario - 1 Based on data extracted from the September 2011 WEOand evidence of firm actions being taken in Europe and the US: the European Central Bank (ECB) launched the Outright Monetary Transactions (OMT) in September and in the US Plan “B” is being discussed to avoid its economy going over the fiscal cliff. Asoft landing has been assumed following actions taken post leadership change in China.

The reason for choosing the September 2011 WEOis that it readily offered data that reflected reason be-hind Scenario -1.

Scenario- 2 Partial data from the October 2012 WEOand the assumption that the world economic growth rate will decelerate in2013, before accelerating at an equally increasing rate up to 2017, was used.

Scenario - 2, was chosen on the basis of the continued economic uncertainty in the outlook of the developed economies, a factor that was specifically raised in the October 2012 WEO. In fact, the world economic forecast of the IMF was predicated on two crucial policy assumptions: European policy makers will adopt policies that generally ease financial conditions further in periphery economies,US policymakers will prevent drastic automatic tax increases and spending cuts (the fiscal cliff), The IMF assumes that should both policy assumptions not be fully implemented, the world economic growth rate will be cut-back by 1.75 percent from its published outlook.

Thus, in the Scenario - 2, the world economic growth rate in 2013 will be 1.9 percent, and will rise to 2.6 percent in 2014.

Assumptions

The expected sharp recovery of total rubber in 2013-2014 is due to the build-up of pent-up demand from two sources: the stagnant growth of 2012 and remnant from the sharp fall in consumption during 2008- 2009. The average world total rubber consumption growth rate was 3.7 percent for 1961-2007, which came down tNIKE SB