Rubber seen going lower

An expected sharp mis-match in global production and consumption may present as a pessimistic picture in the natural rubber market in 2009. According to estimates by various agencies, the world rubber market will see an excess production of 1,000,000 tonnes, which is almost 10 per cent of the production next year. This is mainly due to the lower offtake by the various rubber-based industries, especially the automobile sector, thanks to the ongoing economic slowdown.

This, added with the carry-over stock of around 200,000 tonne this year, the excess stock in 2009 is estimated to be 1.2 million tonnes. This estimate can be translated into a low price in the natural rubber market for the next year too. Eight years back when the excess stock increased sharply the per kg price of rubber dropped to Rs 30. Market experts do not foresee a similar situation, yet the prices would be in a strong bear orbit throughout next year.

The estimates indicate that the global production might fall marginally at 1 per cent in 2009, while the consumption will be lower by over 10 per cent. It is estimated that production of natural rubber next year would be 9,665,000 tonnes against 9,725,000 tonnes in 2007. But, consumption has been pegged around 8,750,000 tonnes against 9,719,000 tonne in 2007.