Rubber Prices May Plummet 35% as Tyre Sales Slow

Global sales of passenger car and commercial vehicle tyres may decline to 1.32 billion units in 2009 from 1.41 billion last year, said No Dock Moung, an analyst with the Singapore based International Rubber Study Group. The drop of almost 6.4 per cent would be the steepest since at least 1975, he said. And according to a Singapore based trading manager from Marubeni Corp., Japan’s largest rubber trading company, this could lead to natural rubber prices weakening by as much as 35 per cent.

“I see the price going toward $1,000 or $1,200” a tonne by the end of September should the economy fail to grow, Marubeni’s Felix Yeo told Bloomberg. “Major economies have yet to make a significant recovery.”

Such a dramatic decline in the commodity’s price would potentially make it more attractive for tyre manufacturers, who are increasingly using synthetic rubber in its place. Current Singapore natural rubber prices of $1,530 a tonne are 18 per cent higher than synthetic rubber alternatives, and Takaki Shigemoto, an analyst at Tokyo-based broker Okachi & Co. commented to Bloomberg that “Demand may shift from natural to synthetic rubber as the differential widens.” He added: “In India, where natural rubber represents about 75 per cent of consumption, demand may easily switch to synthetics.”

One company that is considering how it can take advantage of cheaper raw materials, whether they be synthetic or natural, is Goodyear. On April 10 company spokesman Keith Price stated that the American manufacturer can switch more than 20 per cent of its natural rubber usage to synthetic (or vice versa) “without impacting tyre performance. He said that the company will “continue to push this important initiative so we can substitute based on price.”