The natural rubber (NR) market worldwide has consistently been in a state of oversupply since 2011, reaching 220,000 tonnes of excess that year and around 140,000 tonnes in 2015. The global glut is expected to continue during 2016 to 2020, with the excess being around 110,000 tonnes in 2020. This is driven by the growing tapping area of natural rubber in main producing regions and the tyre industry’s growth rate slowdown, according to a new report by Research in China titled “Global and China Natural Rubber Industry Report, 2016-2020”.
Natural rubber prices have also been hovering on low levels due to the sluggish global economic growth and the excess supply of natural rubber. As of the end of 2015, China’s natural rubber price had fallen to around US$1,140 pertonne which was also the cost price. In 2016, the global average price of natural rubber fluctuates at US$1,200 to US$1,500 pertonne.
China’s natural rubber output experienced a 5.5% year on year drop to 794,200 tonnes in 2015. In addition to weather factors confining China’s natural rubber planting areas to a limited scope and the rubber price lingering on the cost line, more and more farmers have abandoned rubber production. In 2016, China’s output of natural rubber is expected to further decline by 5.3% to 752,100 tonnes.
As the world’s largest consumer, China consumed 4.682 million tonnes of natural rubber in 2015, accounting for 38.5% of the global total. Since there is a serious imbalance between supply and demand, China mostly imports natural rubber to meet the additional demand. The import volume rose 4.8% year on year to 2.736 million tonnes, while the average import price fell 24.5% year on year to US$1,431.6 pertonne in 2015.
In the backdrop of the descending rubber price and the downsized rubber plantations, China’s automobile industry has been expanding in ownership and new increment, conducing to the ascending rigid demand of the tyre industry and the growing demand for natural rubber. In 2016 to 2020, the contradiction between natural rubber supply and demand in China will further intensify; by 2020, the gap between supply and demand will hit about 5.142 million tonnes, an increase of 32.3% over 2015.
Restricted by resource distribution, the natural rubber industry is highly centralised in Thailand, Malaysia and other Southeast Asian nations, represented by the key players such as Sri Trang Agro-Industry, Von Bundit, Southland Rubber, Thai Rubber Latex and Sinochem International.
Given the downturn of the natural rubber market, companies can speed up the development of resources and strategies, increase the planting area in major producing countries as well as enhance processing factory layout to improve production capacity in the next years; on the other hand, they can keep an eye on customisation and high-end market applications of natural rubber, such as military rubber tyres, to heighten the gross margin and competitiveness of products.