Rubber output may dip, tyres to be expensive

Rubber production in Thailand, the world’s largest grower and exporter, may decline for the first time in four years if rain persists across key plantations in the country’s south, according to the Thai Rubber Association.

Output may fall to 3.2 million tonnes this year, down from an earlier estimate of 3.49 million tonnes, said Luckchai Kittipol, president of the group. Production last year totaled 3.25 million tonnes, according to the group. That would be the first annual decline since 2007.

Lower output from Thailand, which accounts for 30 per cent of global supply, would mean less raw material for tyre companies such as Bridgestone Corp, Michelin & Cie. and Goodyear Tyre & Rubber Co, the top three tyre makers, potentially increasing their costs.

“Obviously, this would drive rubber prices higher and will increase production costs for tyre companies, especially truck tyre makers as they use massive volumes of rubber,” Niels Fehre, an analyst at HSBC Trinkaus & Burkhardt AG, said by phone on Thursday from Dusseldorf.

Unseasonal rain from the start of the year caused by a La Nina weather pattern boosted Thailand’s sugar output to record levels, while inundating rubber plantations in the south. Rains may have cut rubber output by 30,000 tonnes in the second quarter, Luckchai said. Futures of the commodity used in tyres and gloves have climbed 27 per cent in the past year.

‘HURTING PRODUCTION’
“Floods in southern Thailand have been hurting rubber production,” Luckchai said on Thursday in a phone interview.

The loss forecast was 50 per cent higher than an initial estimate on March 30. “We have to continue monitoring the weather to see how bad it will affect rubber output this year,” he said.

Thai production may total 3.43 million tonnes this year from 3.25 million tonnes last year, the Kuala Lumpur-based Association of Natural Rubber Producing Countries said in a March report. The September-delivery contract declined 3.2 per cent to settle at 412.3 yen a kg ($5,024 a tonne) on the Tokyo Commodity Exchange.

Unseasonal rains from the start of this year in Thailand caused floods in 10 southern provinces in March and may damage about 50,000 rai (19,641 acres) of rubber plantations, according to the Department of Disaster Prevention & Mitigation. Water levels have since receded, it said.

Fourteen provinces in Thai south account for 80 per cent of the country’s output, according to the Office of Agricultural Economics.

(Source: http://www.business-standard.com/india/news/rubber-output-may-dip-tyres-to-be-expensive/433077/)