IRSG cuts 2013 rubber demand growth outlook; upbeat on China

Friday, 19 July 2013 05:18 -     - {{hitsCtrl.values.hits}}

  • IRSG cuts global rubber demand growth forecast to 3.8%, from 4%
  • World rubber demand expected to grow 5% in 2014
  • IRSG lifts demand forecast for China to 9.5 MT for 2013
SINGAPORE (Reuters): The International Rubber Study Group trimmed its global demand growth outlook to 3.8% for this year, down from its previous projection for a 4% rise, due to lingering worries about consumption in recession-struck Europe. But China may offer a glimmer of hope despite recent economic data suggesting a slowdown in the Asian giant, the IRSG said as it lifted its forecast for rubber demand from the world’s top consumer by more than 4%. “Clearly the most important factor that people are looking at is the state of the economy in Europe, the possibility of a greater slowdown in Chinese economic activities and whether the US can actually sustain what appears to be a recovery in its economic activities,” No Dock Moung, senior economist and statistician at the IRSG, told Reuters in an interview. The IRSG pegged global demand for natural and synthetic rubber at 27 million tons for 2013, down from its prior estimate of 27.7 million tons. China’s demand is expected to rise to 9.5 million tons from 8.9 million in 2012, it added. The group had previously forecast demand from China at 9.1 million tons for 2013. “China is still the factory for the global rubber industry. It’s converting a lot of rubber for its own domestic needs, and it is also actually exporting. It’s a combination of both, the growth of domestic demand and also export market,” No said. China accounts for about 35% of global demand for natural and synthetic rubber, used mainly to make tyres. Vehicle sales in the country rose 11.2% in June from a year earlier, data from the China Association of Automobile Manufacturers showed. The Singapore-based IRSG issues forecasts based on several economic scenarios. The 3.8% increase in global rubber demand is based on the International Monetary Fund’s (IMF) projections in April for a 3.3% global economic growth. The IRSG’s current forecast was prepared before the release of IMF’s latest report in July, in which the IMF cut its 2013 forecast for global growth to 3.1% due to a slowdown in emerging economies and the woes in Europe. IRSG, which compiles data and issues forecasts for global demand and supply, does not give a price forecast. It has 35 member countries which include producers and consumers. Surplus to narrow The group expects global natural rubber production to rise 3.5% in 2013 to 11.7 million tons, based on IMF’s April forecast and driven by higher output from top producer Thailand. But this year’s global surplus is estimated to drop to 284,000 tons from 322,000 tons in 2012, the IRSG said. A narrower surplus may support rubber prices that have plunged almost 22%so far this year. IRSG’s forecast for higher demand next year should also help curb losses. Pent-up demand from the recession in 2008 and 2009 and hopes for a recovery in the world economy will drive up global rubber demand by 5%in 2014, the IRSG said. “It’s up because of the assumption of a pent-up demand. People are more relaxed, people are now accustomed to the idea of the economy expanding,” No said.

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