Rubber supply growth may slow in third quarter as Vietnam delays tapping

Natural rubber output in key growing countries will expand at a slower pace in the third quarter as a “severe” leaf disease delays tapping in Vietnam, according to the Association of Natural Rubber Producing Countries.

Production from member countries, representing 92% of global supply, may increase 3.4% to 2.77 million metric tons during the July-to-September period compared with 12.1% a year earlier, the group said in an e-mailed report today. Supply growth in the first and second quarter this year was 10.5% and 3.3% respectively, it said.

“Slow growth in supply and high oil price could help natural rubber market to continue staying strong,” the Kuala Lumpur-based group said in a monthly report. Supply ’deficit’ will probably continue through 2018 as gains in production may be marginal, it said.

Limited supply may help extend a 46% rally in rubber futures in Tokyo in the past year and increase costs for Bridgestone Corp., Michelin & Cie. and Goodyear Tire & Rubber Co., the top three tire makers. Global natural rubber stocks-to- use ratio has plunged to the lowest level ever as expanding demand shrinks inventories in China, RCMA Commodities Asia Pte. Chief Executive Officer Chris Pardey said on July 26.

A supply deficit in natural rubber may be between 200,000 tons and 300,000 tons this year and may widen to 1 million tons by 2020, the International Rubber Study Group said June 8. Global usage was about 10 million tons in 2010, according to Oxford, England-based LMC International Ltd.

Thailand Flood

Rubber for January delivery declined 1.1% to 391.5 yen a kilogram ($5,032 a ton) on the Tokyo Commodity Exchange today. Futures reached a record 535.7 yen on Feb. 18 as global demand led by China outstripped supply and after rain and flooding curbed output in Thailand and Indonesia, the two largest exporters.

Production may increase in Thailand, Indonesia and Malaysia in the third quarter, while supplies from Vietnam may decline 9.4% as farmers delay latex tapping after a spread of leave disease, the group said.

Total supply of natural rubber is expected to increase 4.9% to 9.96 million tons this year, it said. Production may climb to as much as 10.3 million tons next year and further expand to 13.4 million tons in 2018, the group said.

Imports by China, India and Malaysia are expected to decline during the July-to-September period, the group said. The three countries account for about 48% of global demand.

China, the largest buyer, may import 695,000 tons including rubber compounds in the third quarter, a decline of 5.4% from a year ago, the group said. Imports by India may plunge 32% in the third quarter, while Malaysia may buy 6.3% less than a year earlier, it said. – Bloomberg

Tags: Vietnam Rubber, Vietnam rubber sector