Outlook 2014: Rubber market in Asia continues to thrive

Increased consumption in the wake of stable rubber supply is expected to boost the rubber industry in 2014. The International Rubber Study Group expects global demand to grow annually by 3.8% with China making up for the slack in European economies. China accounts for about 35% of global demand for natural and synthetic rubber, used mainly to make tyres. The IRSG’s forecast is based on several economic scenarios and one of them being the International Monetary Fund’s (IMF) projections of a 3.3% global economic growth.

Demand for natural rubber is attributed to the upsurge in tyre requirements. According to a report from the Freedonia Group, the world demand for tyres is expected to rise by 4.7% annually through 2015 to 3.3 billion units. In value terms, this is translated to 6.5% annual increase to hit $220 billion. The growing automotive tyre market will account for the increased consumption of rubber through 2015. Stronger gains will be registered by the industrial and other tyres segment that a wide variety of tyres will continue being produced, such as bicycle, motorcycle and off-road tyres.

Factors that could impact the rubber industry in 2014 include the market conditions in Europe and North America which could lead to companies holding back their investments. More favourable factors are in the area of technological innovations which companies in emerging and major sectors continue to undertake in order to help raise production efficiency and product quality.

Strong cooperation forged

Thailand is the world’s biggest rubber producer and exporter with production of around 3.8 million metric tonnes of rubber sheet a year, around a third of the world’s output, and exports 90% of it.

Currently the world’s second largest rubber producer, after Thailand, Indonesia aims to become number 1 producer by 2020. Its annual production is forecast to reach 4 million tonnes or 31% of the world’s total natural rubber production. Indonesia is expected to benefit from foreign-invested projects. For instance, Indonesian petrochemical producer Chandra Asri Petrochemical and French tyre maker Compagnie Financiere Michelin announced plans to develop a $435 million synthetic rubber plant in Indonesia. The plant will produce polybutadiene rubber with neodymium catalyst and solution styrene butadiene rubber. All are important feedstocks for the production of environment-friendly tyres. The products will serve domestic needs as well as those of export markets. Construction of the plant is scheduled to begin in early 2015.

Malaysia’s rubber industry is fast recovering and is seen to record higher prices amidst growing demand. The price increase is critical for Malaysia as 90% of rubber producers are small companies relying on rubber prices.

Vietnam’s rubber industry is also experiencing growth with mergers and acquisitions deals involving small companies and major brands providing much-needed boost. Vietnam’s rubber production output reached 1.75 tonnes of latex per hectare. The government has already urged the Vietnam Rubber Group to develop 500,000 hectares of the tree by 2015.

A major factor that is expected to boost Asia’s rubber industry is the close integration and cooperation of major rubber exporting countries. The governments of Thailand and Malaysia have agreed to cooperate on a Rubber City project designed to promote the natural rubber industries of both countries and increase rubber prices.Jordan Shoes