Rubber Prices Bounce Higher as Demand puts Stretch on Reserves

Prices of export rubber from Vietnam are expected to increase on world markets by about 10 per cent throughout the remainder of 2007 as demand continues to outstrip supply. This analyst prediction added that shipments of Vietnam-sourced rubber to global top rubber importer China would experience price rises of 20 per cent, up from the current US$2,000 per ton to $2400. World market prices are tipped to reach $2,200 per ton.

The world produces about nine million tons of natural rubber each year, most of which is already accounted for, leaving a delicate balance between supply and demand. This balance looks in danger of being upset in the near future, as a recent rubber industry conference in Thailand predicted a jump in global demand by more than 6 per cent in the second half of 2007.

The world’s major natural rubber producers – Thailand, Indonesia, Malaysia and Vietnam – are all gearing up for the increased production that anticipated favourable weather and better yields will hopefully bring, but any such rise in output will be immediately absorbed by growing demand. China needs to import 1.75 million tons of natural rubber for to satisfy its burgeoning tyre industry this year, an increase of 9 per cent over 2006. Natural rubber imports into India are also up, with an expected 100,000 tons of rubber expected to enter the country in the year up to March 2008.

Vietnam earned $254 million from rubber exports in the first quarter of 2007, with most business coming from China, South Korea, Japan and the US. From this amount $101 million came from the Chinese market, which, as the largest purchaser of Vietnamese natural rubber, accounted for about 66 per cent of the country’s natural rubber exports last year. Vietnam is expected to ship approximately 780,000 – 820,000 tons of rubber this year, a rise of between 12 and 17 per cent over the previous year.