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7 Jan 2005


Rubber, 2005: Factors Needing Caution, Demand Slowing


Rubber was considered an outstanding agricultural product for 2004 from its historically high prices, which have motivated more rubber production in 2005, particularly in the increase in latex cultivation area on new rubber plantations. In 2005, rubber production in the world market is expected to reach around 8.82 million tons1, increasing by 5 percent. It is expected that in 2005, demand for rubber in the world market will amount to 7.6 million tons. And in 2006, the demand for rubber in the world market should still be increasing by 3.8 percent. It is expected that demand for rubber will grow rapidly in developing countries as the demand for rubber in developing countries grows at an average of about 3.3 percent per annum. However, it is expected that this growth rate will slow because growth in rubber consumption will depend on the expansion of the Chinese economy; the number one consumer in the world. At present, the Chinese government has a policy of preempting its economy, which should lower rubber demand, particularly in the automotive industry. However, it is forecast that rubber prices will remain steadily high. An important factor to this is the economic growth of major rubber consuming countries, particularly the US, Japan, the EU, China and India.

Another important supportive factor is the government's policy to push exports, which are growing constantly, by penetrating and expanding into potential export markets, one of which is India. From the stabilization of rubber prices in the world market and the success in the setting up of a tripartite company with Thai, Malaysian and Indonesian partners, the domestic price of Thai rubber has been stabilized and fetches at least Baht40 per kilogram.

However, one other important factor that needs caution for rubber businesses in 2005 is China; the major export market for Thai rubber, which is implementing a policy to slow its growth in the automobile manufacturing sector, which will also affect exports of Thai rubber. There is also the problem of competition from Vietnam, an important rival for the Chinese market. Moreover, there is the problem of the price of Thai rubber that is higher than that of rivals. The export price of Thai rubber is higher than Indonesia's, the main rival, by around USD100 per ton. This forces countries that import rubber from Thailand, particularly Japan and China, to reduce their imports from Thailand.

Rubber consumption in the world during 2005-2010 will tend to slow, but it is expected to grow dramatically again between 2010-2015. Meanwhile, the volume of rubber production will tend to increase steadily, from the supportive factor of more latex being harvested in the world's major rubber production countries and new rubber plantations that are just beginning to yield produce. For Thailand, the government has a policy to expand rubber planting area by more than one million rai. It is expected that rubber production will increase by 250,000 tons per annum, from the present volume of 3 million tons per annum, on average. Rubber cultivation areas that are being promoted for more growth this year will start producing in 2013, so there must be preparation to cope with the increased volume of raw latex by expediting the Rubber City Project, which will focus on other related industries that use the latex as a raw material. This will increase the added-value to the rubber industry by promoting the export of finished rubber products, instead of exporting only as semi-raw material, as at present.