GERMANY-based Commerzbank said in a report issued recently that natural rubber (NR) surpluses and poor demand, especially from China, will adversely affect spot prices for the commodity.
“Several years of supply surpluses on the global rubber market have pushed prices in Singapore down to their lowest level since autumn 2009. High prices in the years before had made it attractive to set up new plantations. After the long growth phase of rubber trees, this is now increasing supply. On the other hand, rubber demand is suffering under the uncertainty about the global economy,” the bank reportedly said.
With surpluses reaching 179,000 metric tonnes this year and curving down to 153,000 metric tonnes by next year, based on an earlier forecast by Singapore-based International Rubber Study Group (IRSG), the bank
said that shortage is unlikely.
In mid-July, the IRSG projected that global demand will grow by 2-5% year on year in 2013 while production could be flat to 4% higher.
A global surplus is in view, it said, amidst a slowly recovering US economy, the Eurozone crisis drags on and its upward momentum from recession is slow.
China, the world’s largest rubber consumer, accounting for 34% of world consumption (3.85 million metric tonnes in 2012) has imported 2.18 million metric tonnes of NR in 2012, 4% more than the previous year’s 2.10 million metric tonnes import. At end June, China’s first half imports totalled 1.16 million metric tonnes, up 17% from 990,000 metric tonnes year on year, according to data from the General Administration of Customs.
Recently, the country’s manufacturing activity contracted to a 11-month low in July, according to a survey by UK-based HSBC.
The glut of stocks in China is aggravated by poor demand that resulted to inventories buildup
In addition to the country’s surplus situation, the poor demand has led to a buildup of rubber inventories in China. Data on rubber stocks at warehouses monitored by the Qingdao International Rubber Exchange indicated a 330,300 metric tonne-buildup on July 15, compared with 314,170 metric tonnes bulk on January 15.
“Given the plentiful rubber stocks at present, the price correlation should also remain rather loose in the months ahead,” it said.
Recent data from Platts showed that TSR 20 (Technically Specified Rubber) prices stood at US$2.29/kilogramme FOB Basis Singapore, down 25% from US$3.05/kilogramme on January 2.