March 17 (Bloomberg) -- Global natural rubber supply may gain 11 percent this year, exceeding demand, as farmers increase tapping rubber trees after prices jumped last year, the International Rubber Study Group said.
Rubber, used in tires and gloves, doubled in price last year as China overtook the U.S. as the world’s largest auto market, boosting vehicle sales by more than 40 percent. China is the world’s largest rubber consumer.
“Based on past experience when prices are high, there is more interest for small-holders to tap the rubber trees,” said Evans, who is attending an industry conference in Qingdao, China. Synthetic rubber consumption may jump by 18 percent to 14 million tons, according to the IRSG’s report.
Assuming an extended recession, natural rubber production will grow by only 5.1 percent to 10.1 million tons this year, while consumption will rise by 4 percent to 9.9 million tons, he said.
Demand very much depends on the outlook for economic growth and its effect on prices, he said. The IMF said in October the world economy will expand 3.1 percent in 2010 and in January revised that up to 3.9 percent.
El Nino
The effects of the El Nino weather phenomenon on crops is “complex and difficult to predict,” he said.
El Nino, characterized by warmer sea-surface temperatures across the equatorial Pacific, can cut rainfall in Asia, parching crops.
“Is it severe? There isn’t any compelling evidence of it yet,” Evans said. “We will see by the middle of the year if there is any significant impact on production from an extended over wintering period.” Wintering is the period between February and April when rubber trees shed their leaves and latex output slows.
Natural rubber output in the traditional low-production period will improve this year, boosting exports, the Association of Natural Rubber Producing Countries said in its February report. Member nations represent 94 percent of global output.
(businessweek.com)
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