Year in Review: Natural rubber, synthetic rubber markets struggle with volatility

- Jan 03, 2020-

Volatility on the natural and synthetic rubber fronts continued into 2019, though for slightly different reasons.

Synthetic rubber continues to struggle with overcapacity issues, though less so during 2019 than prior years. Roxanna Bauza-Petrovic, general director of programs for the International Institute of Synthetic Rubber Producers, said Asia-Pacific controls 56 percent of overall SR capacity globally with tire elastomers making up 60 percent of the market.

While utilization rates improved overall during the past few years, fewer companies are accounting for the bulk of total global SR production capacity. In 2014, a total of 25 firms controlled 80 percent of capacity. In 2018, that dropped to 21 thanks to a combination of the big players continuing to grow and closures among some of the smaller firms.

The good news is that the IISRP expects less volatility in terms of pricing and raw material supply in the near future.

On the natural rubber front, prices remain cyclical thanks to the operation model of NR planters. According to Maria Gyftopoulou, a senior research consultant at LMC Tyre & Rubber Ltd.—a unit of LMC International consultancy based in the United Kingdom—when prices are low, nobody plants NR trees, which eventually leads to material shortages that drive up prices and planting. It takes newly planted trees seven years to mature.

In 2018, production levels hit record levels, close to 14 million metric tons, but prices remained low.