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The pandemic seems to have a toll on rubber, with the Association of Natural Rubber Producing Countries (ANRPC) anticipating an 8.2 per cent decrease in global demand in April.
The figure was arrived at without taking into account the downward revision expected in India, Thailand, Malaysia, Indonesia and Vietnam, which are facing emergencies and lockdowns, said the ANRPC report titled ‘NR Trends and Statistics’.
The consumption forecasts in these countries are also likely to be revised down in view of the measures such as movement control, emergency and total lockdown enforced by the respective governments, it added.
The virus has brought the world economy to a near stop and the increasing worries over economic distress are expected to dominate sentiments in the NR market. Economists by and large also expect a global recession, with growth likely to contract in the first two quarters of 2020, the report said.
China’s situation
Although manufacturing activity in China is returning to normal, the country’s export-dependent manufacturing sector is likely to be constrained by poor overseas demand, as at least 190 countries are reeling under the pandemic, said the report. It added that the industry in China also faces low domestic demand as the cash-strapped locals are expected to reduce spending, as well as supply-chain disruptions outside the country. As a result, China’s rubber goods manufacturing industry, especially the auto-tyre manufacturing sector, may take a long time to run on normal capacity. This can have a negative bearing on the demand for NR from China, the report observed.
The crude oil market is anticipated to stay low during the second quarter of 2020. The ANRPC report said Brent crude is anticipated to average at $37/barrel. The forecasts made by various agencies also indicate that crude oil prices will be even lower. Due to the high weight enjoyed by crude oil in the basket of various commodity indices, the low crude oil prices are expected to keep commodity indices low. NR usually tracks the general trends across all commodities.
Rise in production
NR production is anticipated at 14.112 million tonnes, up 2.2 per cent, per the revised outlook of major producing countries. However, this revised rate of growth is 0.5 per cent lower than the forecast released in March. The down-scaling is largely attributed to a further fall in NR prices, the movement control measures and lockdown being enforced by the governments, and the fall in the demand for rubber, which has compelled processing factories to scale down operations.
A further slump in prices since the last week of February has compelled a greater number of farmers to abstain from the maintenance of holdings and harvesting of trees. The movement control measures initiated by some of the major rubber producing countries have also disrupted the harvesting, processing and transportation of NR.
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