Synthetic rubber prices could rise more than 15 percent as soaring oil prices increasingly push up processing costs, forcing some tyre makers to use more natural rubber, a senior Indonesian industry official said. This is likely to put more pressure on natural rubber prices, already hovering around 17-year highs because of dwindling Thai supplies and growing demand from China, said Asril Sutan Amir, vice-chairman of the Rubber Association of Indonesia.
“I will not be surprised to see synthetic rubber sold at $2 a kg this year,” Amir told in an interview. “This will in turn drag up natural rubber prices.” From as low as 90 US cents a kg three years ago, synthetic rubber prices have almost doubled to around $1.7. And as oil prices inch up towards $66 a barrel on fears of persistent supply disruptions, Amir said there is no respite in sight.
“Tyre makers around the world have no way out but to boost the use of natural rubber and reduce the usage of synthetic rubber to some extent,” Amir said. “This will also affect natural rubber prices in the longer term.” He added that the average ratio of synthetic rubber to natural rubber in tyres, around 60:40 three years ago, had changed to 55:45, and could become 50:50 by next year if oil prices remained high. Processing costs for synthetic rubber are about 6 per cent of the price of crude oil, he said.
SUPPLY SQUEEZE
Amir said rubber imports by China and India could grow sharply in 2005 as auto sectors in both countries were showing buoyant growth. In 2004, China imported 1.2 million tonnes of natural rubber and India bought 59,000 tonnes. “From where will the supplies come to match this demand growth?” Amir asked. “The problem of Muslim unrest in Thailand is not something which can be solved overnight. The rubber industry in Malaysia is not the biggest priority for them. Whatever rise in supplies will come, it has to come from Indonesia.” Thailand, the world’s top rubber producer, along with Indonesia and Malaysia, account for some 60 per cent of the world’s natural rubber output. Indonesia is the second-largest producer of the commodity.
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Natural rubber prices are around $1.4 a kg, compared with 50 US cents three years ago. “We are forecasting natural rubber prices to rise to around $1.7 or $1.8 this year.”The tyre sector accounts for almost 75 per cent of global rubber consumption. Officials from the three-nation International Rubber Consortium are due to meet on the Indonesian resort island of Bali later this week to discuss ways to stabilise rubber prices. Amir said one of the issues likely to be debated is the revival of old rubber plantations in Indonesia, which might help boost production. Indonesia currently has about 3.2 million hectares under rubber plantations. “Indonesia is keen to replant trees in 400,000 hectares. This could start in a big way from next year,” Amir said.
He added that Indonesia’s 2005 natural rubber output is expected to rise to about 2.25 million tonnes from 2.07 million in 2004, a growth of about 9 percent. World production is expected to grow by about 3.5 per cent to about 8.9 million tonnes from 8.6 million in the same period.Synthetic rubber prices could rise more than 15 percent as soaring oil prices increasingly push up processing costs, forcing some tyre makers to use more natural rubber, a senior Indonesian industry official said recently.
This is likely to put more pressure on natural rubber prices, already hovering around 17-year highs because of dwindling Thai supplies and growing demand from China, said Asril Sutan Amir, vice-chairman of the Rubber Association of Indonesia. “I will not be surprised to see synthetic rubber sold at $2 a kg this year,” Amir told in an interview. “This will in turn drag up natural rubber prices.” From as low as 90 US cents a kg three years ago, synthetic rubber prices have almost doubled to around $1.7. And as oil prices inch up towards $66 a barrel on fears of persistent supply disruptions, Amir said there is no respite in sight.
“Tyre makers around the world have no way out but to boost the use of natural rubber and reduce the usage of synthetic rubber to some extent,” Amir said. “This will also affect natural rubber prices in the longer term.”
He added that the average ratio of synthetic rubber to natural rubber in tyres, around 60:40 three years ago, had changed to 55:45, and could become 50:50 by next year if oil prices remained high. Processing costs for synthetic rubber are about 6 per cent of the price of crude oil, he said.
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