Rubber demand growth to turn positive in June

GLOBAL rubber demand growth is expected to return to positive territory in June 2020 with expectations of natural rubber consumption to grow 0.4%, after declining in April (-23.1%) and May (-10.1%).

According to the Malaysian Rubber Board (MRB), demand from China — the world’s largest consumer of natural rubber — is expected to rise to support its automotive sector growth.

China recorded high vehicle sales in April 2020 with a 4.4% year-on-year increase after recording negative growth over the previous 21 months, MRB said.

“People in China prefer to own a vehicle and reduce the usage of public transport when the Covid-19 outbreak was still active.

“The situation reflects the rubber market is moving positively in tandem with the increase in world’s natural rubber demand as most countries around the world have gradually eased lockdowns and reopened their economies,” it said in a recent statement.

This would give a good start to the global economic network, including the natural rubber market and demand, the MRB said.

After experiencing a sharp fall in prices on April 2, the SMR20 rubber prices recorded positive movement, in the range of between RM4.60 and RM4.95 per kg from April 6 to May 29, 2020.

“One of the main factors supporting the price movement was the recovery of the world’s natural rubber demand with the easing movement restrictions by most countries, especially China, which has resumed operations in the manufacturing industry after imposing lockdowns since late January due to the Covid-19 pandemic.

“It is also supported by positive growth of the global crude oil market, which is currently at US$35 (RM150.50) per barrel,” it said.

The third factor is a global shortage of natural rubber supply, as global rubber production is expected to decline 2.3% to 13.43 million tonnes in 2020 compared to the previous year due to the Movement Control Order (MCO) in Malaysia — one of the world’s largest rubber makers — and the wintering season in rubber producing countries.

However, supply and demand dynamics also depend on a country’s effectiveness in managing its economic recovery plan and containing Covid-19 effectively and efficiently.

Meanwhile, the government will continue to protect the welfare of smallholders by continuing to implement the Rubber Production Incentive to help ease their burden during the period of low rubber prices.

This will also encourage smallholders to continue tapping to ensure enough supply of raw materials for the processing and manufacturing of rubber-based goods. Rubber tapping activities are permitted during the MCO to support the production of medical equipment required in the fight against Covid-19.