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iconRubber scenario in 2019 [   December  2018 ]


Rubber scenario in 2019 is expected to slow down in line with global economic growth. IMF projected that world economy is likely to grow at the same rate of 3.7% as compared to 2018, mainly affected by trade war between China and the US. Chinese economy is expected to grow at 6.2%, with slowdown being caused by internal restructuring, debt reduction in business and state-owned sectors as well as the trade war. The US economy is expected to expand at 2.4-2.5%, supported by domestic consumption, strong employment sector and targeted inflation rate. Eurozone economy is likely to expand at 1.9% - an acceptable growth rate despite a slight slowdown coupled with continued decrease in unemployment. European Central Bank is expected to raise interest rate during the second half of 2019. Japanese economy is expected to grow at 0.9%, with Japanese export sector being supported by merit of Comprehensive and Progressive Trans-pacific Partnership and EU-Japan Economic Partnership Agreement in which Japan benefits from lower export tariff rates to EU.

In terms of natural rubber outlook, it is necessary to take into account factors on production, consumption demand and surplus. According to the Rubber Economist, the growth estimate for global rubber consumption in 2018 has been revised upward to 3.0% but may slow down to average 2.5% a year during 2018-2020. NR consumption is now expected to show a much faster rate of growth compared to SR over the next few years, sending global SR shares down to 51.5% by 2020. For the three year period 2018-2020, NR consumption is forecast to increase by 4.0% a year to reach 14.86 million tonnes in 2020 while SR may increase by only 1.2% a year to 15.75 million tonnes over the same period. The average annual growth rate of 2.5% during 2018-2020 will bring the production level to 14.59 million tonnes by 2020. The Economist Intelligence Unit expects growth in global NR production to slow to an annual average of 1.9% year on year in 2019-20 as high stocks and weak prices discourage supply. Growth in global consumption of natural rubber (NR) is expected to slow to an annual average of just 2.6% in 2019-20, down from an estimated growth of 4.5% in 2018. Gradual monetary tightening in major developed economies in 2019 is likely to weigh on capital investment and vehicle purchases. The global economy is also unlikely to see a meaningful boost from the recent fall in oil prices. One of the reasons why oil prices are falling is softening demand, as growth, especially in China, slows down.

The Thai Rubber Association has positive attitude towards rubber market outlook since natural rubber contributes to economic growth. Besides, The International Tripartite Rubber Council (ITRC) and Thai government have been providing solutions to falling rubber prices with various schemes. This mechanism will ensure a better rubber situation. The promising projects of ITRC comprise the following: 1) promotion of domestic consumption in producing countries at the annual rate of 10%, especially in road construction; 2) establishment of Regional Rubber Market; 3) long-term restriction of production and plantation in 2017-2025 for production-consumption balance; 4) restriction of export quantity during severe price fall; 5) invitation to Vietnam to become ITRC member due to its high production quantity; 6) seeking new approach to sustainable income for smallholders. Thai government reduce unsuitable plantation areas, promotion of other economic crops in place of natural rubber and domestic consumption. Rubber Authority of Thailand will initiate ‘Rubber Innovation Year’ project next year to promote research and development.

In conclusion, the Thai Rubber Association strongly believes in the long-lasting relationship and corporation with the concerned sectors i.e. government agencies, private sector, rubber growers as well as the three largest NR producers, namely Thailand, Indonesia, Malaysia and other rubber producing countries in the ASEAN, especially Vietnam to provide strategic direction and solution to falling prices in short term and long term and ultimately to stabilize the rubber prices.

On the occasion of the New Year 2019, I extend to you and your family our warmest greetings, wishing you a happy New Year, your career greater success, your family happiness and your perfect health and lasting prosperity.

Mr. Chaiyos Sincharoenkul


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