The Association of Natural Rubber Producing Countries (ANRPC) has scaled down world rubber production in 2020 by 10 per cent to 12.597 million tonnes due to a combination of factors such as climate change, extreme weather and leaf fall diseases that disrupted production across major growing countries.
The revised outlook is 3,04,000 tonnes below the forecast by the global rubber body in September. However, the global rubber body said that the NR market could gain in the short-term or at least sustain at the current rate.
ANRPC, in its report NR- Trends & Statistics (Oct-Nov), pointed out that mature rubber trees — occupying around 3,90,000 ha in Indonesia, 1,50,000 ha in Thailand, 19,000 ha in Malaysia, and 20,000 ha in Sri Lanka — are reportedly affected by the fungal leaf diseases. The yield will remain considerably low for the affected trees for about two years. Moreover, the holdings which are newly affected by the disease are likely to be given a tapping lay-off about 45 days ahead of the usual pattern.
Shortage of tappers
The holdings which are unaffected by the fungal leaf diseases are expected to be given tapping rest from the second half of January. Cross-border travel restrictions prevented migrant tappers and plantation workers to return to Thailand and Malaysia. Besides, the resultant labour shortage is likely to continue impacting the supply, the report said. Due to shortage of workers at ports and the resultant delay in loading and unloading activities, ship containers are left at ports for extended periods. The resultant shortage of containers can delay the shipments.
However, the report said that the world consumption is expected to increase by 4 per cent in April-November, 2020-21. The market sentiment and global economic outlook are likely to gain from increased hopes of the mass availability of the Covid-19 vaccines and on expected US stimulus package.
The crude oil market is anticipated to stay in favour of natural rubber market in the short-term. The US dollar is unlikely to gain strength in the short-term as speculative funds increasingly shift to riskier asset classes by leaving safe haven dollar. A weak dollar is favourable to natural rubber market.
Pointing out potential weakness in the short term, the report anticipates a repetition of extreme weather in major rubber growing countries that had disrupted the supply during October and November. It is unlikely to sustain the pent up demand that had restored economic activity in China, India, and other major consuming countries.
The Chinese New Year period till February 2021 is likely to hit the demand as auto-tyre companies are to be less active in the NR market.
NR ended last week’s session on a positive note. In Japan’s Osaka Exchange as well as on Shanghai Futures Exchange (SHFE), rubber futures posted gains on the expectation of strong demand from China. The US stimulus hopes, firm crude oil prices as well as forecast of lower global rubber production too supported the sentiments, said Anu V Pai, Commodity Research Analyst, Geojit Financial Services.
In the domestic market, RSS4 grade rubber traded firm last week on improved demand apart from the cues from overseas market.