According to research conducted by the International Rubber Study Group, rising demand for natural rubber will lead to reduction of global surplus of natural rubber by almost 46% by the year 2015. The Singapore based organization stated that production is likely to exceed the market demand from 650,000 tons and 371,000 tons in 2014 to 202,000 in the coming year. The study group also predicted that by May 2014, the surplus would exceed 714,000 tons capacity in 2013 after having increased Thailand’s output estimates. Thailand happens to be the largest shipper of natural rubber.
Futures dipped by almost 28% in June 2014, depicting the least in the last five years. The stock of natural rubber had increased about three years ago when demand had slowed down due to economic deceleration in China, which was the biggest buyer. The glut, however, is contracting as profits are declining for small farmers who represent 80% of the global supply.
The global tire market is driven by rising global car sales. According to economists, small farmers have started responding to the consistent decrease in prices and they are showing lower willingness to tap the demand for tires.
After reaching 535.7 yen in 2011, futures in Tokyo have declined to 190.3 yen in June 2014, which is by far the lowest in the last five years.
It has been predicted that by the end of this year, the global inventories of natural rubber will reach 3.79 million tons and by 2015, it will reach 4.33 million tons.