Rubber Prices Explained
Rubber prices slowed down to around 150 cents from their 1-year and 6-month hit as demand from China started weak in 2024.
On the supply side, Thailand, Indonesia, and Malaysia showed a significant decline due to heavy rains that affected rubber production. Additionally, Vietnam, China, and India reported slight output decreases as the countries suffered unprecedented rain showers that influenced yields.
As a result, market analysts predicted that the 2024 demand will outpace its supply, leading to varying rubber prices.
Why are rubber prices fluctuating?
Rubber price volatility in the market is due to low levels of supply and demand however, there is more to the imbalanced equilibrium since other factors are behind this.
1. Weather Conditions
Most of the rubber producers in the world come from Asia where it’s frequently visited by typhoons and temperatures getting drier.
Recently, global warming decreased Hevea trees ( a tree that produces liquid sticky sap used in making rubber ) productivity since adequate rainfall is getting scarce and weather temperatures are getting extreme. Thus, this reduces rubber production and drives market price.
2. Production Inputs
The rising cost of fuel, transportation, and labor adds to the worries of rubber producers. To maintain profitability, farmers put an additional value on their produce to keep up their productivity and livelihood.
The leaf fall disease that ravaged over 1 million rubber plantations in Thailand in 2021 left the country’s output dropped by 20%-50%. Thus, this record-breaking decrease will highly influence other rubber-consuming industries until 2024, translating to a potential spike in rubber prices.
4. Synthetic Rubber
Technology advancements lead to synthetic rubber production as a cheaper and more sustainable option than natural rubber. Often, the availability and price of synthetic rubber decide the market price of natural rubber.
5. Lack of Government Subsidies
The government’s shift to industrial investment put the agriculture sector’s production low specifically in countries with emerging economies. As a result, this short fund adds to the burden of farmers to keep up with the global demand.
Which variables impact the price of rubber?
- Supply and Demand
- Weather Conditions
- Production Costs
- Currency Exchange Rates
- Competition from Synthetic Materials
- Government Policies
Where does rubber come from?
Rubber comes from latex, a milky, sticky liquid from rubber-producing plants. According to experts, around 20,000 plant species produce latex but only 2,500 contains rubber in their latex. Hevea brasilensis is one famous plant with rubber in its latex.
The Mesoamerican people from Mexico and Central America first used liquid rubber for medicine, ritual, and painting. Additionally, Native Haitians played football using balls made of rubber and Christopher Columbus discovered rubber during his explorations in the Americas.
Furthermore, in 1839, Charles Goodyear invented a vulcanization process to harden rubber while retaining its elasticity. This started further innovations in rubber and it’s used in multiple industries such as automotive, aerospace, construction, medical, electronics, sports, and industrial machinery.
Here are some of the top applications of rubber:
1. Tires: Tires are the largest consumer of rubber, accounting for over 70% of global demand. Due to its elasticity, durability, and resistance to wear and tear, rubber is an integral part of the tire industry.
2. Hoses and belts: Rubber is important in making hoses and belts, such as garden hoses, radiator hoses, conveyor belts, and fan belts.
3. Gaskets and seals: The rubber’s elasticity and resistance to compression make it a necessary element in manufacturing gaskets and seals as it is used to create watertight and airtight connections between different components.
4. Medical applications: Medical applications such as gloves, catheters, and surgical tubing need rubber in their production.
5. Footwear: Rubber is used in soles and other components of footwear to provide cushioning, traction, and durability.
6. Sporting goods: Rubber is used in making balls, bats, and grips due to its elasticity, resilience, and tackiness.
7. Construction: Rubber is used in some construction applications such as roofing membranes, expansion joints, and vibration dampers.
Today, 70 percent of the global rubber value comes from its top producers such as Thailand, Indonesia, Vietnam, and Malaysia.
What is the future price of rubber?
Generally, the production of automotive tires largely constitutes the marketability of rubber.
However, the segmented tire applications in the automobile industry will also fuel rubber prices. Additionally, the electric car competition among Asian and Western companies will drive a significant market for this commodity.
Overall, the global rubber market will continue to grow in the coming years due to the growing demand from the automotive, tire, and construction industries.
Thus, market analysts predicted bullish rubber prices in 2030, amounting to $2.25 per kilogram.