monta Examines the Factors Surrounding the Recent Price Explosion for Natural Rubber
Natural rubber is, next to film and resin, one of the three major components in monta’s self-adhesive tapes. The tremendous price increase of natural rubber during the past months has led and will continue to lead to significant corrections of the finished good prices. Since September 2009 the prices rose by approximately 200% and specialists talk about prices of over €5.00/kg in a not-too-distant future. Natural rubber is not only expensive but also short in supply. Below you will find some general information about the natural rubber development and all the challenges around this material.
Since the beginning of 2010 the price development of natural rubber has no longer been compliant with the oil price. What are the reasons for the natural rubber boom? Of course, speculation plays an important role, because raw materials were, and are, recommended as a lucrative investment.
The financial volume of investors seems to be enormous and the development confirms the actions of funds managers. But it would be too easy to only trace the price explosion back to this fact, as production and demand are probably the crucial part of this huge price increase.
Production in 2009/2010 was almost constantly affected by extreme weather conditions. There were hardly normal production phases for the manufacturers. Extended dry periods followed by extended rainy periods during the last two years exerted negative influence on the harvest.
Due to a persistent solid market, the behaviour of producers and consumers has changed. The producers, and in the first place the ones who buy their raw material from small farmers (smallholders), such as Thailand, Indonesia and Malaysia, have a much higher financial cost due to the high prices. Because of missing sales contracts, which have to be presented to the bank for financing, and the fear that the market could turn, as well as the risk to be sitting on expensive inventory, it is only produced upon order.
Even the purchasing behaviour of consumers has changed in this rising market. It was purchased mainly at short-term delivery dates. The fear of a new crisis and any resulting price decline was significant. This led to a continuous strong demand for short-term product and there was almost never a price pressure on spot-goods. The consuming countries in Asia, led by China, whose economy has seen tremendous growth and who traditionally are seen on the market as a spot buyer, played a big role in this surge in demand. In China the natural rubber demand increased from 2009 to 2010 from 2.7 million tons to 3.66 million tons and the tendency is rising. With homeland production of only 600,000 tons, China depends on the import.
Outlook: as production is partly still restricted due to the weather conditions, this difficult situation will continue.
The so-called wintering season, which begins in some production areas in February, is already standing in the door. During this season the trees (Hevea brasiliensis) lose their leaves and their sap should not be drawn. Normally the production starts from May; however, in recent years the wintering season was prolonged by a second and even third wintering and therefore extended by one to two months. Will this be the case again this year? Furthermore, the extensive new plantings as from the year 2005 will not be ready to draw before 2012. Therefore, experts do not see an improvement of the supply situation before that time.
monta Klebebandwerk is doing its utmost to secure the supply chain for its customer base in this difficult period. For further information on monta’s product range, please visit monta’s website.