ANRPC Association of Natural Rubber Producing : releases Natural Rubber Trends & Statistics, December 2016

The Association of Natural Rubber Producing Countries (ANRPC) is happy to release its Natural Rubber Trends & Statistics, December 2016.
We have entered a New Year with new expectations and hopes. We are also at the doorstep of a New Chinese Lunar Year, the Year of Rooster, which starts on 28 January. The year 2016 has passed by witnessing a rebound in natural rubber prices in the fourth quarter, driven by recovery in crude oil market, supply concerns mainly caused by floods in South Thailand, renewed expectation of a US-led faster global economic recovery and the resultant improved demand outlook.

The recovery in crude oil price was driven by the OPEC's deal on 30 November to cut output by 1.2 million barrels per day (bpd) for six months from January 2017. Following OPEC's decision, producers from outside OPEC, led by Russia, agreed to reduce output by 558,000 bpd, the largest non-OPEC contribution ever. While Brent crude oil prices rose 24% from end of September to end of December 2016, rubber prices (SMR-20 in Kuala Lumpur) jumped 43% during the same period. Short-Term Energy Outlook released on 10 January 2017 by the US Energy Information Administration signals Brent crude oil averaging at US$ 53 per barrel in 2017, up 20.5% from US$ 44 per barrel in 2016. While the anticipated higher feedstock prices can make synthetic rubbers more expensive in 2017, they offer reason for rubber growers to cheer in the New Year.

Twelve provinces in South Thailand are severely affected by the region's worst floods in the past three decades. South Thailand is the latex bowl of the world. Thailand accounts for 37% of the global supply of natural rubber and 70% of the country's output comes from its south. According to a preliminary assessment made by the Rubber Authority of Thailand, the flood is likely to shave out at least 360,000 tonnes from Thailand's output of NR expected in 2017. The country will be able to produce only 4.381 million tonnes in 2017 as against 4.741 million tonnes originally expected.

During the three years from 2014 to 2016, global supply of natural rubber, including non-ANRPC, fell by 0.6% average annual rate whereas the demand grew at 3.2% rate. Based on preliminary estimates covering all countries, including non-ANRPC, global supply of NR stood at 11.975 million tonnes during 2016, which was short of the corresponding global demand by 655,000 tonnes. The faster growth in demand helped to absorb the excess supply generated until 2013 and bring favourable balance between demand and supply.

Based on IMF's World Economic Outlook released in October, global economy is expected to grow at 3.4% growth rate in 2017, faster than 3.1% rate in 2016. In the light of subsequent favourable developments, especially in the US and Europe, IMF is likely to scale-up the outlook for 2017. Based on the emerging global economic scenario anticipated by IMF, global supply of NR will be short of demand by 350,000 tonnes during 2017. The expected deficit in supply is likely to be more severely felt during the period up to May 2017 on account of seasonal factors affecting the supply.

Besides a favourable demand-supply fundamental and anticipated trends in crude oil market, natural rubber market during 2017 is expected to gain from improvement in commodity prices. IMF predicts a 10% jump in the index of 'All Commodities' in 2017 as compared to 2016.

However, based on the available picture of emerging global economic scenario, possibility is very limited for a substantial rise in rubber prices during 2017. Presence of large extent of untapped mature area, especially in Malaysia and India, and the space available for increasing the average yield across countries, suggest that supply has the potential to increase much beyond the expected level if prices scale too high. This can prevent the market from scaling substantial up. It also needs to take into account that the possibility of oil prices gaining further or staying at the current level of around US$ 55 per barrel, depend on successful execution of the curtailment programme agreed by the OPEC and non-OPEC countries. Higher oil prices also raise the chances of other oil producers boosting output, particularly the US Shale gas operators.

This issue of ANRPC's Natural Rubber Trends & Statistics is more comprehensive and future-oriented. Besides the actual figures up to 2015 and preliminary estimates for 2016, it provides the figures anticipated for the first quarter of 2017 and also for the whole year 2017, separate for all ANRPC members accounting for 90% of the global supply of natural rubber. Moreover, it provides annual figures of export of natural rubber from Thailand, Vietnam and Malaysia ,segregated into destination countries, with reference to 2015.

Before I conclude, let me place on a record my appreciation and gratitude to our statistical correspondents in Member Governments who provided the most updated figures and forecasts for 2017. I am particularly grateful to Rubber Authority of Thailand for timely making available the information pertaining to flood-hit South Thailand by making a quick assessment of the situation. I also express my deep sympathy to rubber growers in South Thailand who have badly suffered from the devastating floods. I request esteemed users of Natural Rubber Trends & Statistics to continue supporting us with your valuable feedback.

I wish you all a very successful 2017 and a more prosperous Year of Rooster.

Dr. Nguyen Ngoc Bich
Secretary-General