China Provides Optimistic Rubber Counterpoint

China has increased its rubber imports from 180,000 tonnes in the first two months of 2009 to 190,000 in March, Bloomberg has today reported. A rise of 10 per cent in automobile sales year-on-year (according to figures from the China Association of Automobile Manufacturers) has led to the rise following government subsidies. Incentives to the industry Japan, Germany and France are also offering incentives.

Bloomberg suggests that any revival in rubber demand from recovering car sales may be mitigated as tyre-makers switch to cheaper oil-based alternatives. The mix of synthetic to natural rubber in tyres is roughly 60 to 40 per cent, said Lawrence Orlowski, an analyst at S&P Equity Services in New York. Usually about 5 to 10 per cent of a tyre’s material can be switched, he said.

“Demand may shift from natural to synthetic rubber as the differential widens,” said Takaki Shigemoto, an analyst at Tokyo-based broker Okachi & Co. “In India, where natural rubber represents about 75 per cent of consumption, demand may easily switch to synthetics. In Japan, as synthetics represent almost 60 per cent of consumption, a shift may not occur.”

Global demand for both forms of rubber may slide 9 per cent this year, more than double last year’s drop, according to the International Rubber Study Group. Usage will shrink at least 6.1 per cent to 20.8 million metric tons, and the slump likely will be greater if the recession worsens, Hidde Smit, secretary general of the group, said in an interview on 23 March.

“The macroeconomic situation has deteriorated rapidly and so has the outlook for the tire industry,” Robert Simmons, head of rubber and tyre research at LMC International, said in March. “The truck tyre market has been hit the hardest as freight demand has been so badly hurt.” US truck tonnage dropped 9.2 per cent in February from a year ago, the American Trucking Association said 25 March. Fleets were still “witnessing a tough environment” with no signs of a “sustained recovery,” association Chief Economist Bob Costello said in a statement on its Web site.

Rubber supplies will increase in coming months as trees produce more latex after a slow seasonal period known as wintering, said Vorathep Wongsasuthikul, a director of the International Rubber Consortium, which represents Thailand, Indonesia and Malaysia. Thai production totaled 1.62 million tonnes in the second half of last year, up 13 per cent from 1.44 million in the first half, according to the Rubber Research Institute of the Thai farm ministry.

The nations, which harvest about 7 million tonnes a year, cut exports by 270,000 tonnes in the first quarter, according to the group. “Rubber should come down around May,” said Prachai Kongwaree, president of Thai Rubber Glove Manufacturers Association. “There is more supply from Thailand.” (Tire Review/Akron)