The outbreak of novel coronavirus in China’s Wuhan city has hurt expectations for natural rubber (NR) demand’s growth at least for the first quarter (Q1) of 2020-2021, according to the analysis of Association of Natural Rubber Producing Countries (ANRPC). China accounts for 40% of global demand in NR.
“In view of the economic implications of the coronavirus outbreak, the economic outlook for the first quarter of China, Japan, Thailand, Malaysia and a few other countries may need a further downward revision. Therefore, the world demand for NR in 2020, particularly in the first quarter, could be lower than what is anticipated now,” said Kuala Lumpur-based ANRPC’s latest bulletin Natural Rubber Trends & Statistics.
Economic slowdown, crisis in auto sector, trade uncertainties and geopolitical factors have translated into 1% decline in the world’s NR consumption in 2019. Before the novel coronavirus outbreak was factored in, ANRPC had pegged 2.7% increase in NR consumption in its projection for 2020. The NR outlook had been scaled up, following the inking of the first phase of trade deal between the US and China, that is counted to ease global trade tensions.
ANRPC secretary general RB Prema Dasa said in the editorial (dated January 31, 2020) that even as “the signing of the US-China trade deal on January 15 renews hopes on NR demand, the outbreak of novel coronavirus has clouded the expectation at least for Q1 2020”. At the same time, “it is early to gauge the implications of the outbreak of coronavirus on the demand prospects of NR,” Prema Dasa added.
On one hand, the coronavirus outbreak has generated additional demand for hygiene products like rubber gloves. But then, “the subsequent government-imposed bans and restrictions, beginning from mid-January, have halted all major economic activities, including the transport sector which is the dominant end-user of NR”. The potential negative implications of the outbreak of the coronavirus will limit the prospects of Thai baht and Malaysian ringgit from gaining strength, particularly during the first quarter of 2020, the bulletin observes.
Despite the optimism over better trade relations between China and the US, the rising concern is over the global demand in NR in the first quarter of 2020-2021. “Given the dominance of China in the world demand for NR, the emerging developments in the Chinese economy and the demand for NR from the country are crucial,” said ANRPC.