Natural rubber prices to be firm in the short run

This is due to the ongoing tense political situation inThailand, world's largest producer of natural rubber

Concern over the global output of natural rubber in 2014, coupled with the ongoing tense political situation in Thailand have pushed up  the international prices  of the commodity.Thailandis the world’s largest producer of natural rubber. Prices are expected to be steady to firm in the short run.  

Association of Natural Rubber Producing Countries [ANRPC] reports that un-favourable weather could lead to a  lower than expected supply growth in 2013,  in its latest report on natural rubber trends. Supply crunch has pushed up the price of RSS-3 grade inBangkokmarket by around Rs 6/kg in three weeks time. TOCOM futures trading moved on a steady note for January and February contracts. But in the long run it moved on a slightly negative mode.

Global rubber demand is poised to recover in 2014 and 2015, driven mainly byChina,IndiaandJapan, according to a report from the Economist Intelligence Unit, based inLondon.  Demand will rise 4% each in 2014 and 2015, it said last week. So contrary to the earlier projections rubber  prices likely to be firm  during this month and  in  the first quarter of 2014.

Indonesia,  world’s second largest producer  has planned to cut output next year by 10%, while urging otherSoutheast Asiarubber-growing countries to do the same to reduce global stocks and support prices. Indonesian Rubber Association has  recently  issued a letter to its members   to reduce production by 10% in next year.

Indonesia’s 2013 rubber output will be little-changed at 3.1 million tones with gains hampered by wet weather and curtailed by an earlier agreement with fellow producersThailandandMalaysiato trim exports.Indonesia,ThailandandMalaysiaaccount for about 70% of world output, with major tyre makers that include Bridgestone Corp, Michelin and Goodyear Tire & Rubber Co taking most of their output.

Indonesiahas askedThailand,Malaysia,Vietnam,LaosandCambodia, world’s leading producing countries  to join them  in the output cuts for next year. MeanwhileVietnam, the world’s third-largest natural rubber exporter afterThailandandIndonesia, aims to keep its rubber output next year unchanged at around 1 million tones.  

Global rubber prices now  advanced to a two-month high as better-than-expected Chinese manufacturing data raised speculation that demand will increase from the largest consumer, and as violence inThailand stoked supply concerns.

Data released on Tuesday noted that  Chinese manufacturing growth beat analyst estimates in November, indicating the nation’s economic recovery is sustaining momentum amid government efforts to rein in credit growth. According to experts ifChina’s import increases  price might be firm during the first quarter of next year.