Recovery fragile for world’s top rubber producers

THE world’s top rubber producers are starting to emerge from their worst quarter in over a decade, but the path to recovery looks fragile.

Though consumption from rubber glovemakers is continuing to rise, demand from carmakers, traditionally the biggest customer base, is still down.

Meanwhile, China reopening its economy has added some optimism, but concerns remain for the rest of the world, including the US.

Natural rubber exports are seen declining about 10% due to slowing demand, especially from China in the first five months of 2020.

In the futures market, rubber prices, which tumbled 27% in the first quarter for their worst performance since 2008, have since gained about 14%. However, physical prices have not changed much as there’s not enough demand from tyre factories, according to Gu Jiong, an analyst at Yutaka Shoji Co Ltd, a broker in Tokyo.

“Prices can’t go up anymore because demand is not there,” Gu said by phone from Tokyo. Many rubber factories, including those that supply major tyremakers such as The Goodyear Tire and Rubber Co and Bridgestone Corp, are unable to sell physical rubber and are forced to deliver it to the futures market instead, he said.

With the outlook still fraught, major producers — Thailand, Indonesia and Malaysia — are coping in different ways. Thailand has chosen to use more rubber domestically as an ingredient for roads and guide posts. Indonesia said Chinese demand is helping, but overall exports are still declining and a recovery won’t be seen until the end of the year. And Malaysia is betting on rubber gloves to be its saviour. — Bloomberg