Stretch Factor

Sri Lankan investors stretched their resources to dip into plantation stocks with exposure to rubber, demand created by a giant leap in rubber prices from an 2002 average of below Rs. 55.00 to Rs. 110.00 for March forward prices.

Why the high price? Chinas growing appetite for consumer goods with its expanding middle class, an up swing in demand for motor vehicles and a tripartite agreement between Thailand, Malaysia and Indonesia to cut supply by 10 per cent – a measure agreed last year to stimulate prices.

The sector index swelled up by 16.58 points during the day with news of creep rubber prices going up.

Lalan Rubbers recent acquisition of Bogawantalawe Plantations and Load Stars increasing interests in the sector has also contributed, say stockbrokers.

However, industry experts say natural rubber is bouncing back globally and with it expect prices to remain attractive.

The tripartite agreement to cut output and the growing demand from the motor industry consuming over 60 per cent of natural rubber, raw material for tires and other accessories has greatly contributed to the price movement.

However, in the long term, industry experts say China will be the main price-driving factor with its sweltering population.

The world per capita rubber consumption is estimated at 3 kilos, while Chinese average consumption ranges just above 2 kilos.

Industry experts say with Chinas population over the 1 billion mark, a one-kilo rise in per capita rubber consumption could create a huge gap in supply.

In the short term industry experts forecast creep rubber prices to reach US $ 2.00 before the end of 2003.