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8 Jun 2006

Agriculture

The Future of Natural Rubber: Soaring Prices until 2009

คะแนนเฉลี่ย
Since 2004, rubber prices have tended upward continuously. In the first 5 months of 2006, rubber prices rose sharply. The price of raw-rubber No.3 smoked sheets during January-May 2006 rose significantly to THB 981 per kilogram, increasing 61.0 percent over-year. At present, the price of rubber sheets is THB101.88 per kilogram. The price of rubber No.3 smoked sheets is THB 103.88 per kilogram. That is a record-breaking price. In the final half of 2006, the rubber price will adjust higher continuously. It is expected that the average price of smoked sheets in 2006 will not be lower than THB 75.00 per kilogram, against 2005 when it was THB 55.19 per kilogram, rising 24.7 percent. For the export prices of rubber smoked sheets, it is expected that they will rise to USD2.0-2.5 per kilogram, increasing over the previous year, when the average export price throughout the year stood at USD1.50, or around THB60 per kilogram.

It is expected that the trend in rubber prices will skyrocket continuously over the next 5 years, until 2009. After that year, the area of rubber cutting will expand, because there will be expanded cultivation area in many countries due to the rubber price hikes. That has induced agriculturists to prepare for an oversupply of rubber. Thailand has prepared for that situation by launching plans to promote industries that support rubber production by focusing more on exports of pre-manufactured rubber goods, such as rubber tires, automobile parts made from rubber and the exported rubber in the form of processed materials, for example, rubber sheets - rubber smoked sheets, rubber bars, and export adjustments from rubber smoked sheets to focus on rubber bars for to meet increasing demand in the global arena.

Rubber prices have risen continuously ever since 2005, and it is anticipated that they will remain high until 2009. This resulted from increasing demand for rubber, causing many countries to expand cultivation area. It is anticipated that in 2009, or for the next 5 years, there will be a number of new rubber plantations. However, after considering demand for rubber, there are several factors to be concerned about, especially, the expansion of demand for the rudder tire industry that is vital to rubber as an agro-industry. Automotive industries are forecast to not expand much between 2004-2009, and that growth has already begun to slow. Accordingly, crisis shortages of rubber tend to relieve this, and eventually lead to the problem of a flood in rubber products.

Prices may be heading downward again; a warning for rubber producers to be cautious and prepare for market fluctuations.

Thailand has a plan to promote rubber support industries, in particular, advanced processed rubber industries such as rubber gloves, rubber automotive tires and parts, belts and sponges, and we should create innovation and brands along with increases in natural rubber output to substitute for synthetic rubber. It is expected that domestic industries will use more rubber, up 11 percent from 350,800 tons to 400,800 tons. Meanwhile, exports of rubber and rubber products will be pushed to THB239,580 million from THB239,580 million, an increase of 12.5 percent. Currently, more than 90 percent of the rubber trade is in smoked rubber sheets on which value can be added through advanced processing and development of diversified products. The Ministry of Agriculture, therefore, plans to reduce smoked rubber sheet trading and increase the ratio of block rubber production and utilization from 37 percent to 40 percent, together with increasing latex utilization from 18.0 percent to 23.0 percent, and will urgently upgrade the standard of Thai latex-rubber, block rubber and smoked rubber sheets to world class standards, which will lift Thai competitiveness in the world market. Furthermore, the ministry also plans to increase rubber plantation area to 1 million rai in phase II in order to meet global demand with an average annual growth of 2-3 percent.

Projection of Production Volume and Global Market Demand
Units:Thousand tons
2004
2005*
2009*
Production output
8,410

(5.3%)
8,780

(4.4%)
10,000

(Average 4.0% p.a. )
Demand
8,230

(3.5%)
8,690

(5.6%)
10,230

(Average 3.7% p.a.)
Differences between output and demand
180
90
-230

Source: * projection from global rubber mark et analysis

Note: Figures in parentheses are changes y-o-y

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Agriculture

Rubber