Rubber shortage will worsen this year: Producers

China's auto sales growth rate will probably increase to 8 percent this year, according to the China Association of Automobile Manufacturers. [Photo/China Daily]

The world shortage of natural rubber will deepen this year as the economy improves in China and India, the biggest buyers, and car sales expand, according to the Association of Natural Rubber Producing Countries.

"The trend is promising on signs of a strong recovery in demand," said Jom Jacob, a senior economist. Demand may continue to outstrip supply next year as the global economy recovers, he said by phone from Kuala Lumpur.

The shortage may extend a 26 percent advance in Tokyo futures this year, potentially increasing costs for companies such as Bridgestone Corp, Michelin & Cie and Goodyear Tire & Rubber Co, the top three tire makers. Rubber is the second-best performer this year among 80 raw materials tracked by Bloomberg.

"Demand is going up as car sales increase," said Masayo Kondo, president of Commodity Intelligence Ltd in Tokyo. Prices may climb 20 percent to $4,778 a metric ton in the next two months, he said.

The deficit may more than triple to 186,000 metric tons this year from a previous estimate of 51,000 metric tons as China and India shift their policy from fighting inflation to boosting growth, and the economies in the United States and Japan improve, Jacob said. Supplies exceeded demand by 153,000 metric tons last year, he added.

The August-delivery contract declined 1.2 percent to settle at 333.1 yen today.

China, India

China's auto sales growth rate, including commercial vehicles, will probably accelerate to 8 percent this year after slowing to 2.5 percent in 2011, according to the China Association of Automobile Manufacturers.

US light-vehicle sales accelerated in February to a 15.1 million seasonally adjusted annual rate, the fastest pace since February 2008 when sales ran at a 15.5 million rate, according to Autodata Corp.

The natural-rubber deficit in India will widen as increased car sales and tire production boost demand, Vinod Simon, president of the All India Rubber Industries Association, said at a seminar in Bangkok on March 9.

Member production

The shortage in the country may climb to 511,000 metric tons in 2014-2015 from more than 100,000 metric tons in 2012-2013, said Simon, basing his view on economic growth of 6.5 percent a year.

Output of natural rubber worldwide may grow 2.6 percent to 11.54 million tons this year, less than expansion of 8 percent last year, said Jacob. Demand may climb 6 percent to 11.73 million tons from the previous estimate of 4.8 percent, he said.

Production from association members, representing 92 percent of supply, may expand an average of 4 percent a year from 2013 to 2018, with a replanting rate of 3.5 percent, Jacob said. Member output may climb to 10.9 million metric tons next year and reach 13.4 million metric tons in 2018, he said.

A large number of productive trees, planted in the 1980s, will have to be uprooted between 2012 and 2018, reducing the planted area worldwide, he said. Farmers have delayed cutting down trees to benefit from higher prices, he said.

Bloomberg News in Bangkok