Special Report: China's Natural Rubber Market in 2012

Part Four: Overview of Major Macroeconomic Factors in H2

The following is a summary of major macroeconomic factors concerning the rubber industry in the second half of 2012 (by month):

July:

-- The European Union (EU) imposed an embargo onIran's oil export on July 1;

-- The central banks of the euro-zone countries,Britain,China,Denmark, andJapanfurther relaxed their monetary policy;

--China’s Q2 economic growth fell below 8%.

August:

-- More commercial banks inSpaincall for external aid;

--Greeceasks for further debt relief;

-- The establishment of the European Stability Mechanism (ESM) postponed;

-- El Nino begins to develop in tropical Pacific sea, leading to a reduction of rainfalls inSoutheast Asia, and consequently affect rubber production.

September:

--Sloveniapublishes official document to seek help from international organizations;

-- TheUScredit rating faces new round of downgrading;

--Iran's oil export embargo expected to be removed after the oil exporter’s composition with the International Atomic Energy Agency.

October:

--China's Q3 GDP slows to 7.4%, further cut in required reserve ratio (RRR) and interest rates expected;

-- EU summit mulls over boosting the size of ESM;

-- European central bank reaches for 3^rd wave of long-term refinancing operation (LTRO);

November:

-- Price hike in grains and food in several countries might lead to further turmoil in the region;

December:

-- European summit to examine further aid program toItaly;

-- US Congress may agree to extend the economic stimulus adopted in the Bush administration.

Overall, the market is likely to continue to take a downward path in the near term, but the macroeconomic condition is expected to improve in the coming months, a favorable sign to stimulate demand and to facilitate enterprises’ de-stocking process.

In the second half of this year, the rubber futures traded on the Shanghai Futures Exchange (SHFE) are expected to stay in the range of 18,000 to 25,000 metric tons (tonnes). And it might still take a while for the commodity to bottom out.

(Contributed by Huo Bing, vice general manager of Yunnan Gaoshen Rubber Co; edited by Olivia, olivia@tireworld.com.cn)