Global Perspective Competitiveness Analysis and Factors Affecting Trade Flow of Natural Rubber in International Market
25 temperature and rainfall. Thus, the possibility to supply synthetic rubber remains
relatively consistent, while the actual supply continues to increase.
Figure 9 World Synthetic Rubber Production and Consumption, 2000 – 2013 Source: International Rubber Study Group IRSG, 2014
From the beginning of 2007 through the end of 2009, there was a decrease in both the production and consumption of synthetic rubber. The decline in the
world supply of synthetic rubber was caused by the high cost of production due to the extremely high world oil prices. On the contrary, beginning in early 2010,
increasing demand in the automotive sector in various parts of the world, especially in large countries such as China and the USA, led to a considerable
increase in the production and consumption of synthetic rubber. Through 2013, both natural and synthetic rubber has shown an increase on both the production
and the consumption side.
Natural rubber and synthetic rubber are commodities that can be classified as either complementary goods or substitutable goods. These two commodities
can be classified as complementary goods because they have a unique set of advantages and disadvantages, specifically in relation to tire manufacturing
because the two cannot replace one another in most situations. However, in the “green tire” manufacturing process, there is a greater need for natural rubber than
synthetic rubber from 30-40 to 60-80, making the two goods substitutable.
In relation to worldwide natural and synthetic rubber price trends, the two prices seem to be relatively comparable, indicating that the two goods are
competitive in the world market Figure 10. In 2010 and 2011, there was a fairly substantial increase in the natural rubber price,
as a result of low yield. Yunnan, one of Chinas major rubber producing provinces, experienced severe drought last
year that affected production. Indonesia and Thailand, on the other hand, were drenched in heavy rain. In addition, the large demand for natural rubber from
Japan, the USA and China, causing prices to go up.
2000 4000
6000 8000
10000 12000
14000 16000
18000
000 T
on
Year
ProducNon ConsumpNon
26
Figure 10 Development of Worldwide Natural Rubber and Synthetic Rubber Prices
Source: International Rubber Study Group IRSG, 2014 Global economic uncertainty ultimately affects the worlds natural rubber
trade. In 2012, for example, the worlds natural rubber price plummeted due to the global economic crisis. This economic hardship was felt by several countries,
which are significant importers of natural rubber, especially certain EU countries such as Germany and Belgium, which imported less because of their economic
conditions. The situation was made worse by China, which a major importer of natural rubber, removing the stock of natural rubber into the world market. The
primary cause of the plummeted price is not caused by the poor quality of natural rubber, but purely because of the effect of global economic conditions was
deteriorating.
In order to try to improve the worlds natural rubber prices in the face of the economic crisis, Indonesia, Thailand and Malaysia agreed to apply the rubber
export volume reduction scheme Agreed Export Tonnage Scheme AETS, which amounted to 300 thousand tons from October 2012 to March 2013. The
agreement was announced on August 16, 2012 and has ultimately increased the price of rubber Daily Composite price, or the combined average price in the third
country by 2.54US per kg to around USD 2.9 per kg at the beginning of December 2012. According to the International Tripartite Rubber Council ITRC
total rubber production from these three countries accounted for 67 of the total world production and 86 of total world exports.
In contrast to natural rubber, the price level for synthetic rubber is influenced by world oil prices. This is due to petroleum being the raw material for
synthetic rubber. If the world oil price increases, the price of synthetic rubber will also increase. If the price of synthetic rubber increases and the increase is greater
than the increase in the price of natural rubber prices, most industries will tend to use more natural rubber than synthetic rubber. World oil prices have fluctuated
from year to year, as shown in Table 4. From this data, it can be determined that world oil prices have grown an average of 8.34 per year. As we know,
500 1000
1500 2000
2500 3000
3500 4000
4500 5000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
USTon
Year
Natural Rubber SyntheNc Rubber
27 petroleum is a non-renewable resource, which will run out at some point.
Presently, environmental awareness is improving, which has encouraged some industries to optimize their usage of natural rubber rather than synthetic rubber.
Table 4 World Oil Prices, 2011 - 2013 USBarrel
Year Oil Price
2003 28.1
2004 36.05
2005 50.64
2006 61.08
2007 69.08
2008 94.45
2009 61.06
2010 77.45
2011 107.46
Source: Organization of the Petroleum Exporting Countries OPEC, 2012
5.2 Conditions of Natural Rubber in Exporting Countries 5.2.1 Thailand
Thailand is a major worldwide producer of natural rubber. Moreover, the natural rubber land area in Thailand is smaller than the natural rubber land area in
Indonesia, yet Thailand has a higher level of productivity. The total plantation area, as well as overall production of natural rubber in Thailand increased over the
period 2003 until 2012 Table 5. During this period, the total plantation area grew by 22 percent, while overall production grew by 18 percent. However, the
productivity of Thailand decreased in the period from 2004 to 2010. This is partly due to environmental factors such as extreme weather that inhibits the production
of natural rubber in Thailand Table 5.
Since 2001, Thailand has been the largest natural rubber producer and exporter in the world. The natural rubber industry has undergone very rapid and
fundamental changes, with the introduction of many new players and substantial growth amongst traditional suppliers. Based on FAO data, Thailand produced
approximately 31 of the global natural rubber in 2012, followed by Indonesia 27 and Malaysia 9. Thailand produces more than 3 million metric tons of
natural rubber annually. With its prime location, Thailand offers rubber plantation investors an ample water supply, a low incidence of power outages, and reliable
infrastructure for smooth operation. Table 5 Area Harvested, Production, and Productivity of Natural Rubber in
Thailand, 2003 - 2012 Year
Area Harvested Hectare
Production Quantity Tonnes
Productivity TonnesHectare
2003 1600640
2860093 1.787
2004 1655991
3006720 1.816
2005 1691099
2979722 1.762
2006 1742896
3070520 1.762
28
2007 1766849
3024207 1.712
2008
1819502 3166910
1.741
2009 1856072
3090280 1.665
2010
1929257 3051781
1.582
2011 2042502
3348897 1.640
2012
2050000 3500000
1.707 Source: Author’s elaboration with data from FAO, 2013
Thai rubber businesses are flourishing because of solid government policies that promote the industry. Policies of utmost importance are those, which focus on
the lower tariffs that result from the countrys free trade agreements with trading partners such as China, Australia, New Zealand, and other ASEAN states. The
government of Thailand has also increased the financial incentive for growers to cut down rubber trees that are more than 30 years old and replace them with new
ones in an effort to increase productivity. The Office of the Rubber Replanting Aid Fund of Thailand has set aside 5 billion Baht for this purpose and intends to
increase Thailands natural rubber supply by an additional 250,000 metric tons per year through 2017 Insight Alpha, 2014.
Thailand’s government offers many opportunities within the natural rubber industry, leading many companies to increase their capacities in order to fulfill the
increasing demand. For example, Sri Trang Agro-Industry is the largest rubber processing and exporting company in Thailand that hopes to become a leader in
the global market by 2014. The company initiated its plan by setting aside 2 billion Baht with the purpose of building three new plants throughout 2013 and
2014. The extensive growth of the rubber industry has substantially helped the development of many rubber products and their respective industries. Goodyear
Thailand Public Co., Ltd. has invested US 25 million for a project that has the intent to raise the plants daily production capacity for airplane tires from 130 to
160 units and for automobile tires from 4,900 to 7,200 units Insight Alpha, 2014.
The natural rubber industry in Thailand is clearly on a growth path. The prospects for the industry remain positive, as natural rubber is a fundamental
resource. Rubber is indispensable in the manufacture of various industrial and consumer products, from vehicle tires, accessories, gloves and medical devices.
The steady in demand for automobiles and medical devices due to the increase in income levels and economic growth will also help to push the demand for rubber
in the future.