There Are Problems in The Future Development of The International Rubber Industry

On May 26, the 18th Shanghai Derivatives Market Forum hosted by the Shanghai Futures Exchange opened at the Shanghai Futures Building. At the Shangyuan Rubber (11365, -50.00, -0.44%) Forum roundtable forum held in the afternoon of the same day, the guests had an in-depth discussion on some of the issues currently facing the international rubber market.

Although, this year, with strong supply and demand in domestic and overseas markets, the market generally believes that the focus of rubber prices will most likely remain high during the year. However, in the long term, there are certain problems with the supply of natural rubber at home and abroad, which require further attention.

According to Salvatore Pinizzotto, Secretary-General of the International Rubber Research Group (IRSG), the current main production areas of natural rubber are concentrated in Southeast Asia, with the natural rubber production of Thailand and Indonesia accounting for 56% of the total global natural rubber production. However, Li Hong, general manager of Shanghai Shidong Trading, told reporters that due to the impact of the new crown epidemic in the past two years, Thailand's economy has continued to decline, and bank lending to the rubber industry has been significantly reduced. In addition, as the new crown epidemic broke out in Thailand recently, and the Thai government also discovered the Indian mutant strain among the infected people, some areas have implemented strict regional closure policies. These will have a certain impact on the output of natural rubber in the past two years.

In addition, Li Hong believes that relevant companies need to pay more attention to Thailand’s previous policy of legalizing cannabis cultivation. "Although this policy will not affect local natural rubber output in the short term, considering that growing cannabis will yield more profits, in the long run it will definitely affect local rubber cultivation."

In fact, in the past two years, Thailand's rubber production has declined due to the low return rate of rubber planting. Li Hong added that compared with 5.14 million tons in 2018, Thailand's natural rubber production in 2020 was only 4.5 million tons. This proves the rubber industry’s low return on investment and the reluctance of new capital to participate in planting or processing.

According to Wang Pei, chairman and general manager of Qingdao Quanmei Rubber Tire, the entire Southeast Asia is in such a situation. Especially in the past two years, due to trade frictions, a large number of basic production companies have relocated to Southeast Asia, which has driven up land prices and worker wages in Southeast Asia.

Under such circumstances, even though relevant companies have raised wages for rubber tapping and planting personnel in the past two years, workers are not very motivated. According to Salvatore Pinizzotto, not only are new investments in plantations continuing to shrink, but there are also fewer and fewer young people and women participating in the rubber planting industry.

Although production in Africa and Latin America has continued to grow in the past two years, Wang Pei believes that the growth of new production areas cannot offset the decline in production in main production areas, which will ultimately affect future market supply and demand.

As for China, it seems to be facing the same situation. When introducing the current situation of Hainan's rubber market, Li Qisheng, president of Hainan Natural Rubber Industry Group, said that Hainan currently cannot find a large-scale seedling company, and private enterprises have not planted new rubber in the past two years.