Rubber may not see a substantial price rise globally during 2017, according to the latest forecast of the Association of Natural Rubber Producing Countries (ANRPC). This is despite the International Monetary Fund analysis that natural rubber price would gain much in 2017 compared to that of 2016.
Nguyen Ngoc Bich, ANRPC secretary general, says in the Kuala Lumpur-based rubber body’s bulletin on January 13 that looking at the available picture of the emerging global economic scenario, “the possibility is very limited for a substantial rise in rubber prices during 2017”.
The presence of a large extent of untapped mature area, especially in Malaysia and India, and the space available for increasing the average yield across countries suggest that supply has the potential to increase much beyond the expected level, if the prices scale too high. This can prevent the market from scaling substantial rise, he said.
ANRPC’s latest bulletin “Natural Rubber Trends & Statistics” also points out that the need to take into account the possibility of oil prices gaining further or staying at the current level of around $55 per barrel would depend on the successful execution of the curtailment programme by the OPEC countries.
Nguyen Ngoc Bich notes in his preface to the ANRPC bulletin that the fourth quarter of 2016 had witnessed a rebound in rubber prices, driven by the recovery in crude oil market, supply concerns, mainly caused by floods in South Thailand, renewed expectation of a US-led faster global economic recovery and the resultant improved demand outlook.
Rebound in natural rubber prices was because of OPEC’s deal on November to cut output by 1.2 million barrels per day (bpd) for six months from January 2017. Producers outside OPEC, led by Russia, had also agreed to cut output by 558,00 bpd.
It was when Brent crude oil prices rose 24% from September-end to December-end, 2016, rubber prices (SMR-20 in Kuala Lumpur) jumped 43%, during the same period. ANRPC points out that “while the anticipated higher feedstock prices can make synthetic rubbers more expensive in 2017, they offer reason for rubber growers to cheer in the New Year.”
IMF had, in its publication World Economic Outlook, said that the global supply of natural rubber will be short of demand by 350,000 tonne during 2017. Due to seasonal factors, the expected supply deficit will be more severely felt during the period up to May 2017.
You may also like to watch this video
Besides a favourable demand-supply fundamentals, rubber market during 2017 is expected to gain from improvement in commodity prices, according to IMF. IMF predicts 10% jump in the index of “All Commodities” in 2017 compared to 2016. ANRPC, in its bulletin, expresses reservation on any substantial price rise as the supply, especially in India and Malaysia, could stretch beyond the increased level if the prices scale up too high.
According to preliminary production estimates, the member countries produced 10.769 million tonne during 2016, down 2.5% from the previous year.