Mon, 14 Jan 2008
This year there are less factors to cite which could reduce the price of natural rubber, with many signs pointing toward the commodity climbing up the chart.

A higher demand for automotive products, intensive global campaigns for the use of environmentally friendly materials, poor climatic conditions which reduced the rubber harvest and higher oil prices all contributed to push the price up.

Gapkindo chairman Daud Husni Bastari said the global demand for natural rubber is set to rise by at least 5 percent this year, to more than 9.5 million tons. Since 2001, the demand has increased by an average 4.72 percent annually.

"The rapid growth of automotive industries in developing countries will bring increased demands for rubber. Aside from China and India, rubber will also be in demand in Eastern Europe and Latin America," Daud said.

Rubber is mainly used in automotive industries as a raw material for making tires. Tire firms often use a combination of natural and synthetic rubber, because synthetic rubber is made from oil and is cheaper.

"Nowadays, there is a tendency that tire companies use more natural than synthetic rubber in their formula, out of concerns for the environment. I guess in future natural rubber will be used more in tires," Daud said.

Next year, Gapkindo expects the price of technically specified rubber will be more than US$2 per kilogram. At present the price hovers at around $2 to $2.2 per kilogram.

This year, rubber producers may also face unexpected extreme climate change, which threatens to significantly reduce rubber crops from major producing countries such as Indonesia, Thailand and Malaysia.

A crop shortage of this kind would automatically increase the price of rubber on the global market.

Higher oil prices would also contribute to the volatility of rubber prices since it would affect the production of synthetic rubber. This would increase the demand on natural rubber to balance the higher price of synthetic rubber.

"Oil prices will definitely affect the volatility of the rubber prices. As long as oil prices stay higher than the price of natural rubber the conditions will be favorable," said Azrul Latif, investment relations officer for publicly listed rubber plantation company PT Bakrie Sumatera Plantation.

Rubber is mainly traded on Tokyo's TOCOM and Singapore's SICOM commodity markets. -- JP/Rendi Akhmad Witular



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