Natural rubber on threshold of long-term deficit, says ANRPC

The natural rubber (NR) market is on the threshold of a deficit for a long period that could extend up to 2031 due to widening chasm between supply and demand, according to the Association of Natural Rubber Producing Countries (ANRPC).

In what is certain to be good news for the growers, NR shortage is likely to be 2 lakh tonnes this year and it can help the commodity's prices rise further until the year-end, says ANRPC’s Rubber Market Intelligence Report.

The year 2023 is expected to see global rubber supply short and the deficit progressively widening in the subsequent years through 2028. The calculations have been made on the basis of planting trends and potential expansion of mature areas in individual countries, the report said.

Price fluctuations

The global NR economy has come out of the long period of excess production capacity and over supply, leading to a long period deficit. The NR economy over the past five years has been under the grip of the excess production caused by abnormal expansion of the area occupied by mature trees. Although the global mature area is expected to expand by nearly 250,000 hectares in 2022, the resultant increase in production is likely to be absorbed by a robust global demand.

Global supply is expected to be 13.8 million tonnes against a demand for 15.8 million tonnes. Although the shortage is not substantial relative to global demand, this can reflect in physical markets in the last two months of the year, the report said.

According to K.N.Raghavan, Executive Director, Rubber Board, ANRPC's prediction is the result of low prices for rubber during the period since 2012-13, which led to a fall in new planting and replanting. This will lead to the upward movement of prices which will bring more areas under rubber cultivation and cutting down of senile plantations with consequent replanting.

The periodic severe fluctuation of prices causes distress to all sectors in the rubber value chain. While farmers face difficulties when prices fall, manufacturers are at the receiving end when prices move up. Farmers who had been hit hard by the low prices will welcome upward price movement. “And it augurs well for the NR sector as well as we can expect increased production through improved productivity and lesser area of untapped plantations”, he said.

India is amongst the few countries that have attempted to bring new areas under planting. This is through the project aimed at rubber cultivation in two lakh hectares in North East with financial support from consuming industry, he added.

The ANRPC report also added that prices in the short term are likely to get the support from a favourable supply-demand situation and the strengthening crude prices. The pent-up demand arising from the revival of economic activities, and the anticipated 2 lakh tonnes of deficit in the current year can help rubber prices gain further in the last two months of the year.

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