Supply of natural rubber from the Association of Natural Rubber Producing Countries (ANRPC) dropped by 9.5 per cent during the first quarter of this year. The ANRPC members account for over 93 per cent of global rubber production.
Low prices reduced farmers' enthusiasm in optimising the yield through intensive harvesting and adoption of good agricultural practices, the ANRPC said in its latest monthly report, Natural Rubber Trends and Statistics.
Outlook revised
Prices are reported to have fallen by 30 per cent in the first quarter. The Association has revised the outlook for the current year's supply which suggests a marginal fall (-0.1 per cent) to 10.297 million tonnes (mt). Earlier, global supply was projected to increase by 1.1 per cent to 10.420 mt this year.
The fall in production was triggered to a large extent by Thailand and Malaysia. Production during the quarter fell 24.5 per cent in Thailand and 9.4 per cent in Malaysia, reflecting farmers' response to declining in prices.
India was projected to have normal production, registering a 3.8 per cent growth to 9.27 lakh tonnes during the year. The country's production for the first four months of the current year is expected to grow by 3.7 per cent to 2.78 lakh tonnes.
Chinese to spurt
While significant shortfalls are expected from Thailand and Malaysia, Chinese production this year is expected to spurt up by over 38 per cent. Vietnam is another country where production is slated to grow by 12 per cent.
Global exports during the first four months are estimated to fall by 6.6 per cent with much of the shortfall emanating from Thailand, Malaysia and Indonesia. Vietnam's exports is expected to grow by 22 per cent, most of which is targeted to China.
Imports of natural rubber rebounded in the international markets, mainly aided by a surge in imports by India and Vietnam.
Global rubber consumption grew faster than expected at 4.7 per cent, against an expectation of 2.1 per cent. Much of the growth in consumption came from China, India and Malaysia.
Dampener
In India, high interest rates forced consumers to postpone purchase of new vehicles, the ANRPC said. Passenger car sales grew only two per cent.
On the positive side, the country's Automotive Tyre Manufacturers' Association (ATMA) reported a six per cent annualised rise in production of truck/bus tyres during February, a marked improvement from the 2.6 per cent annualised rise registered during last year.
Taking into account the poor performance in the general rubber goods sector, the Rubber Board of India anticipates the country's rubber consumption to grow by an annualised 1.2 per cent during the second quarter.
Recovery Losing steam
In spite of low supply, global rubber prices have fallen marginally from mid-March onwards caused by sluggish demand outlook, decline in crude oil prices and unfavourable trends of relevant currencies. Global economic recovery is losing its momentum after showing signs of improvement during early part of the first quarter.
While demand is anticipated to slow down in the second quarter, the resulting negative market sentiments are expected to be absorbed by the shortfall in supply.