By Dr.Louis Rumao

Uncertain world economy, unstable oil market, volatility in major currencies etc make forecasting global rubber economy a real challenge

With rising automotive sales, growing population, increasing disposable income and rising urbanization, especially in the developing countries, the need for industrial rubber products is increasing.
While rubber industry is more than 100 years old, rubber usage continues to be dominated by one major product -– tyre — which is used on bicycles, trucks, aircrafts, automobiles, and off-road vehicles, consuming close to three-fourths of total rubber tonnage. The global rate of growth for tyre manufacturing is projected to be similar to that for industrial manufacturing in general. Growth in general manufacturing will also bolster consumption of rubber in industrial and consumer products. In the industrial rubber segment, construction (roofing) and mechanical goods (hoses, belts, gasket, seals) are estimated to post healthy growth, resulting from increased demand for goods, new construction, machinery and equipment.
Synthetic rubber (SR) is projected to hold steady at 55% of world rubber demand through 2019. Last year, consumption of SR grew faster than NR for the first time in 3 years. While use of SR is expected to become more common in some applications, particularly rubber gloves, natural rubber will continue to dominate the tyre industry.
While NR price trends with supply & demand, the SR price clearly trends with oil price. Last year world NR output grew only a little over 1 per cent. The slow growth rate may continue for the next few years, unless the NR price takes a jump.
Stocks to consumption ratio for both NR and SR have been relatively stable recently, and are expected to remain the same in the near future.
World demand for rubber is forecast to rise 3.9 per cent per year to 33 million tonnes in 2019. Gains will be driven by increased tyre manufacturing, which represents by far the largest application for rubber. Rising income levels in developing regions, particularly in the Asia/Pacific region, will support gains in motor vehicle manufacturing and usage, fueling demand for tyres and, in turn, for rubber. “Growth in manufacturing activity will also support increased demand for rubber in non-tyre applications such as automotive components, industrial rubber products, medical products and footwear,” according to the Fredonia Group analyst Elliott Woo. The Asia/Pacific region is projected to post the fastest growth in rubber consumption through 2019 and will account for nearly two-thirds of global demand in that year.

Driving for growth

Profitable companies practise total cost management through optimized sourcing, economy of scale, value engineering and lean manufacturing. They also pay special attention to worker skill development and maintaining a large talent pool. However, for GROWTH, companies need to have the following:
– Best-value, innovative product
– Effective marketing whereby your customers feel that they would be losers if they do not buy your product.
When you have achieved the above, your products will sell themselves!
Also, beware of new challenges and opportunities:
– Need for green, environmentally sustainable products and operations involving alternative energy, water conservation, emission and effluent controls. You can be pro-active or be forced by customers and regulatory edicts!
– Bio materials from renewable resources
– Nanotechnology fillers to improve product performance.
With the current uncertain world economy, unstable oil market and volatility in major currencies, forecasting global rubber economy remains challenging.