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Thailand, Indonesia and Malaysia intend to reduce rubber exports by a combined 240,000 tonnes over four months (April to July 2019) in order to push up rubber prices in the second quarter of 2019 amid low rubber prices
in the international market.
Kaitai expects the move to help push domestic rubber prices up to 43.
0 baht/kg in the second quarter from 41.
9 baht/kg in the first quarter, but only in the short term
.
For the trend in the second half of 2019, Kaitai research expects rubber prices to gradually fall to 37.
5-40.
9 baht/kg, down 0.
5-0.
7%
year-on-year 。 The main headwinds include: first, the slowdown in China's rubber demand, due to the possible slowdown of the Chinese economy in the rest of the year, affecting the Chinese auto market (China's auto sales are expected to shrink by 6.
0% year-on-year in 2019) and China's rubber demand; Second, global rubber production is still at a high level, in addition to the increase in production in major rubber producing countries such as Thailand, Indonesia and Malaysia (which account for 67% of global rubber production), and new producers such as Cambodia, Laos, Myanmar and Vietnam (CLMV) are also continuing to increase; Third, it is still necessary to track global crude oil prices that are depressed by changes in the structure of the global crude oil industry (because oil is a substitute for rubber and the price of the two is positively correlated).
Therefore, domestic rubber prices are expected to remain at a low level for the whole of 2019, with a forecast range of 40.
8-41.
2 baht/kg or a year-on-year contraction of 0.
8-1.
7%.
For the efforts of the three countries to increase rubber prices by restricting rubber exports, in the long run, it will play a limited role in solving the problem of low global rubber prices, and structural factors due to global rubber demand and supply, especially the increase in China's rubber production, are still the pressure factors
on global rubber prices.
As the world's largest consumer of rubber, China has shifted to producing its own rubber, which has increased its bargaining power
in the global market.
China is expected to surpass Thailand and Indonesia as the world's largest rubber producer by 2022, when China and Cambodia, Laos, Myanmar and Vietnam will produce 26%
of the world's total rubber production.
In the face of these challenges, the government should support domestic rubber prices through various short- and long-term relief measures for rubber farmers, such as limiting domestic rubber supply according to demand for use
.
In addition, the creation of added value for rubber by rubber product operators through innovation is also an important factor
that contributes to the long-term stability of rubber prices.
