The free fall of rubber prices in Sri Lanka will halt before long, as major rubber producing countries agreed this week to take remedial measures, the Rubber Research Institute says.
“Indonesia, Thailand and Malaysia account for 70% of the world’s natural rubber output. They met this week to discuss the current situation. So this drop in prices should not continue for very long,” said the Chairman of the Rubber Research Institute (RRI), Dr Asoka Nugawela.
According to international news reports, these three top natural rubber producers have agreed to cut output by 210,000 tonnes next year by felling trees and have also agreed to reduce rubber tapping. This is expected to boost market prices by cutting supplies.
Local commodity brokers said that already markets in Singapore and Tokyo were reacting to this news by showing signs of slight gains, but remained cautious. Over the last few weeks natural rubber prices hit a 3-year low after sharp price increases earlier in the year.
This week RSS Grade 1 rubber was selling at around Rs 180 per kg and crepe rubber at Rs 190 per kg. But commodity brokers say that within about one month, prices of rubber had fallen by about Rs 100.
The reasons are traced to the global financial crisis and the drop in crude oil prices.
“The crude oil prices have reduced sharply over the last few weeks. So the prices of synthetic rubber have also reduced. So people are shifting to synthetic rubber from natural rubber,” said Dr Nugawela.
“The other reason is the economic slowdown. Natural rubber is mainly used to manufacture tyres. But because of the economic slowdown, vehicle sales have reduced in developed countries like the US and EU. So the demand for natural rubber has dropped,” said Dr Nugawela.
However, the RRI says demand should pick up with supply adjustments by major natural rubber producing countries.
Demand from large developing countries like India and China is also expected to help stabilise prices.
“Although the demand is not as high as in developed countries, the demand in countries like India and China is growing.
These are very large countries. So, you may not see an immediate increase in demand and prices but natural rubber prices will not continue to fall for very long,” said Dr Nugawela.
At this point rubber producers in Sri Lanka have been told to cut production by reducing the number of tapping days. |
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