Surging rubber prices raising ‘alarm bells’: experts

KUALA LUMPUR, Apr. 24 (AFP) – Rising demand that has pushed prices for natural rubber to record highs is raising fears world supplies will run short, experts said Monday at an international summit in the Malaysian capital. Growing demand has seen prices rise steadily for over a year, hitting 2.0 dollars per kilogram (2.2 pounds) as manufacturers baulk at the high cost of petroleum-based synthetic rubber which has risen in tandem with oil prices.

“People are ringing alarm bells already now because the 2.0 dollar price is very high,” said Hidde Smit, chief of the inter-governmental International Rubber Study Group (IRSG) which comprises 17 nations and the European Union.

“There’s a limit to what can be produced and demand is growing at a steady pace so people are afraid that there will be a shortage in the near future,” Smit told AFP at the World Rubber Summit.

“The very high prices which you are seeing now already makes it very clear that the market is tight,” he said.

Analysts have attributed current price levels to strong demand in developed economies, as well as from India and China where the auto sectors are rapidly expanding.

Meanwhile natural rubber supplies have fallen due to adverse weather conditions in producing countries.

China has become the world’s largest rubber consumer and importer since 2001, with domestic consumption hitting 2.04 million tonnes last year.

However, Malaysia’s Plantation Industries and Commodities Minister Peter Chin warned against over-estimating the demand for natural rubber and said that a rush to plant could produce a glut and price plunges in a few years time.

“We need to be cautious in and responsible in our projections and forecasts,” he said.

“We should try and be reasonable about our planning, not to be too over-bullish with the present high price and go about a massive replanting.”

IRSG senior statician Darren Cooper told delegates that the price of rubber in February had shot up 54 percent from a year earlier to 2,103 dollars per tonne in the New York market.

With consumption already outstripping rubber production in 2005, Cooper projected a worldwide deficit of 820,000 tonnes by 2010. “If we don’t do anything, if there is no substitution (for natural rubber) and no noticeable increases in production, there will be a deficit,” he told reporters.