Outlook for the rubber industryOutlook for the rubber industry

International Smallholder Rubber International Smallholder Rubber ConferenceConference

Phnom Penh, CambodiaPhnom Penh, Cambodia24 June 200924 June 2009

Panel 4 : ProspectsPanel 4 : Prospects

Prepared by the Secretariat of the Prepared by the Secretariat of the International Rubber Study GroupInternational Rubber Study Group

Presentation content

The world economy, the IMF scenario

The vehicle sector

The tyre sector

Long-term aggregate rubber demand forecasts

Natural rubber supply potential

Natural and synthetic rubber demand

The effect of alternative economic growth scenarios

Economic developments

Economic activity is represented by Gross Domestic

Product (GDP)

IRSG uses data from IMF

IRSG forecasts for 2009 to 2014 are taken from the IMF

IMF published data/forecasts in April 2009

Forecasts for later years are based on IRSG model

World GDP growth, July 2008 and April World GDP growth, July 2008 and April 2009: recession hits earlier2009: recession hits earlier

-2

-1

0

1

2

3

4

5

6

7

8

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

%

data forecasts July 2008 forecasts April 2009

The vehicle sectorThe vehicle sector

Passenger car productionPassenger car production

0

10

20

30

40

50

60

70

80

90

1975 1980 1985 1990 1995 2000 2005 2010 2015

mill

ion

s

production Jul-08 Apr-09

Commercial vehicle productionCommercial vehicle production

0

5

10

15

20

25

30

1975 1980 1985 1990 1995 2000 2005 2010 2015

mill

ion

s

production Jul-08 Apr-09

Growth in vehicle production

% growth

Passenger cars

Commercial vehicles

2006 6.3 0.4

2007 5.8 4.5

2008 -1.3 -6.6

2009 -22.4 -20.1

2010 3.6 7.6

2011 22.3 12.8

2015 14.3 10.7

2018 -3.4 -5.8

The tyre sectorThe tyre sector

Tyre sectorTyre sector

Tyre sales is the sum ofTyre sales is the sum of

original equipment (OE) tyre sales, determined original equipment (OE) tyre sales, determined

by the number of vehicles producedby the number of vehicles produced

replacement (RP) tyre sales, determined byreplacement (RP) tyre sales, determined by

the number of vehicles on the roadthe number of vehicles on the road

Passenger car tyre sales,Passenger car tyre sales,original equipmentoriginal equipment

0

50

100

150

200

250

300

350

400

450

1975 1980 1985 1990 1995 2000 2005 2010 2015

mill

ion

s

sales Jul-08 Apr-09

Passenger car tyre sales,Passenger car tyre sales,replacementreplacement

0

200

400

600

800

1000

1200

1975 1980 1985 1990 1995 2000 2005 2010 2015

mill

ion

s

sales Jul-08 Apr-09

Passenger car tyre sales,Passenger car tyre sales,totaltotal

0

200

400

600

800

1000

1200

1400

1600

1975 1980 1985 1990 1995 2000 2005 2010 2015

mill

ion

s

sales Jul-08 Apr-09

Commercial vehicle tyre sales,Commercial vehicle tyre sales,original equipmentoriginal equipment

0

20

40

60

80

100

120

140

1975 1980 1985 1990 1995 2000 2005 2010 2015

mill

ion

s

sales Jul-08 Apr-09

Commercial vehicle tyre sales,Commercial vehicle tyre sales,replacementreplacement

0

100

200

300

400

500

600

1975 1980 1985 1990 1995 2000 2005 2010 2015

mill

ion

s

sales Jul-08 Apr-09

Commercial vehicle tyre sales,Commercial vehicle tyre sales,totaltotal

0

100

200

300

400

500

600

700

1975 1980 1985 1990 1995 2000 2005 2010 2015

mill

ion

s

sales Jul-08 Apr-09

Growth in tyre production

% growth

Passenger car tyres

Commercial vehicle tyres

2006 0.8 3.7

2007 5.9 5.6

2008 -0.4 0.2

2009 -6.4 -3.8

2010 -3.4 4.5

2011 4.5 5.4

2015 8.7 7.6

2018 0.4 0.8

Long-term aggregate rubber Long-term aggregate rubber demand forecastsdemand forecasts

Aggregate rubber demandAggregate rubber demand

Aggregate rubber demand in the tyre Aggregate rubber demand in the tyre

sector; influencing factors are tyre sector; influencing factors are tyre

production and rubber production and rubber weight per tyreweight per tyre

Aggregate rubber demand in the general Aggregate rubber demand in the general

rubber goods sector; influencing rubber goods sector; influencing

factor is economic developmentfactor is economic development

Rubber consumption Rubber consumption 2018:2018: tyres 16.5, GRG 11.2, total 27.7 tyres 16.5, GRG 11.2, total 27.7

0

5

10

15

20

25

30

35

1975 1980 1985 1990 1995 2000 2005 2010 2015

mill

ion

to

nn

es

tyres Jul-08 tyres May-09 GRG Jul-08GRG May-09 total Jul-08 total May-09

World rubber consumption(‘000 tonnes)

Total rubber

volume % growth

2006 21,810 4.0

2007 23,045 5.7

2008 22,299 -3.2

2009 20,817 -6.6

2010 21,392 2.8

2011 22,502 5.2

2015 27,118 6.1

2018 27,669 0.7

Modelling natural rubber Modelling natural rubber supply potentialsupply potential

Natural rubber supply potentialNatural rubber supply potential

About 85% of natural rubber is About 85% of natural rubber is produced by smallholdersproduced by smallholders

Production capacity suitable concept Production capacity suitable concept for synthetic rubber, but not for natural for synthetic rubber, but not for natural rubberrubber

A general framework for natural A general framework for natural rubber supplyrubber supply

The trend in production will be called The trend in production will be called normal productionnormal production

Production exceeds normal production Production exceeds normal production at high pricesat high prices

And vice versaAnd vice versa

The vintage approach derives and The vintage approach derives and includesincludes

The composition of the total area for The composition of the total area for natural rubber according to the year of natural rubber according to the year of planting (the planting (the vintagesvintages))

The average The average yield profileyield profile for a hectare for a hectare of rubber during its lifeof rubber during its life

Technical progress in quality of clones Technical progress in quality of clones affecting yield profiles of hectares affecting yield profiles of hectares planted in various yearsplanted in various years

18 April 200918 April 2009

Projections up to 2018 depend Projections up to 2018 depend on planting policieson planting policies

Natural rubber productionNatural rubber productionThailandThailand

0

500

1000

1500

2000

2500

3000

3500

4000

1975 1980 1985 1990 1995 2000 2005 2010 2015

'000

to

nn

es

data normal production

Natural rubber productionNatural rubber productionIndonesiaIndonesia

0

500

1000

1500

2000

2500

3000

3500

4000

1975 1980 1985 1990 1995 2000 2005 2010 2015

'000

to

nn

es

data normal production

Natural rubber productionNatural rubber productionMalaysiaMalaysia

0

200

400

600

800

1000

1200

1400

1600

1800

1975 1980 1985 1990 1995 2000 2005 2010 2015

'000

to

nn

es

data normal production

Natural rubber productionNatural rubber productionIndiaIndia

0

200

400

600

800

1000

1200

1975 1980 1985 1990 1995 2000 2005 2010 2015

'000

to

nn

es

data normal production

Natural rubber productionNatural rubber productionVietnamVietnam

0

100

200

300

400

500

600

700

800

900

1000

1975 1980 1985 1990 1995 2000 2005 2010 2015

'000

to

nn

es

data normal production

Natural rubber productionNatural rubber productionChinaChina

0

100

200

300

400

500

600

700

800

1975 1980 1985 1990 1995 2000 2005 2010 2015

'000

to

nn

es

data normal production

Natural rubber productionNatural rubber productionSri LankaSri Lanka

0

20

40

60

80

100

120

140

160

180

1975 1980 1985 1990 1995 2000 2005 2010 2015

'000

to

nn

es

data normal production

Natural rubber productionNatural rubber productionCambodiaCambodia

0

20

40

60

80

100

120

140

160

180

200

1975 1980 1985 1990 1995 2000 2005 2010 2015

'000

to

nn

es

data normal production

Global NR normal production to reach Global NR normal production to reach 13.0 million t. by 2018; actual production 13.0 million t. by 2018; actual production

higher or lower depending on priceshigher or lower depending on prices

0

2000

4000

6000

8000

10000

12000

14000

1975 1980 1985 1990 1995 2000 2005 2010 2015

'000

to

nn

es

data normal production

Confronting supply potential and Confronting supply potential and demand at 2008 market sharesdemand at 2008 market shares

The marketThe market

Forecasts for consumption of rubber Forecasts for consumption of rubber (a(already presented)lready presented)

Production potential of natural rubber Production potential of natural rubber (a (already presented)lready presented)

How do these compare?How do these compare?

What are the determining What are the determining factors driving the share of NR factors driving the share of NR

in total rubber consumptionin total rubber consumption

In broad terms:In broad terms:• Technology: shares may depend on the Technology: shares may depend on the

country or the factorycountry or the factory• Composition of the end-uses: cv tyres use Composition of the end-uses: cv tyres use

more NR than pc tyresmore NR than pc tyres• Price ratio of NR over SRPrice ratio of NR over SR

Rubber prices and oilRubber prices and oil

Explaining developments in NR Explaining developments in NR pricesprices

Analysis based on market Analysis based on market equilibrium: equilibrium:

supply and demandsupply and demand

Explaining developments in Explaining developments in SR pricesSR prices

Modelling prices of SBR using prices of Modelling prices of SBR using prices of styrene, butadiene and NR and GDP:styrene, butadiene and NR and GDP:

a good fita good fit

0.90

1.10

1.30

1.50

1.70

1.90

2.10

2.30

2.50

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

US

$/kg

data model

Projections of prices of oil Projections of prices of oil are given below.are given below.

The price of oil to level off at around The price of oil to level off at around US$80/barrel and then declineUS$80/barrel and then decline

0

20

40

60

80

100

120

140

1990 1995 2000 2005 2010 2015

US

$/b

arre

l

data Jul-08 Apr-09

The IRSG makes and needs The IRSG makes and needs price forecasts for NR and SR price forecasts for NR and SR in interaction with production in interaction with production and consumption forecasts. and consumption forecasts.

The IRSG is not allowed to The IRSG is not allowed to publish these forecasts.publish these forecasts.

NR share in consumptionNR share in consumption

38

39

40

41

42

43

44

45

46

47

48

1995 2000 2005 2010 2015

%

share 43% forecast 46%

Rubber consumption Rubber consumption 2018:2018: NR 12.8, SR 14.9, total 27.7 NR 12.8, SR 14.9, total 27.7

0

5

10

15

20

25

30

35

1975 1980 1985 1990 1995 2000 2005 2010 2015

mill

ion

to

nn

es

NR Jul-08 NR May-09 SR Jul-08SR May-09 total Jul-08 total May-09

World natural rubber consumption(‘000 tonnes)

Consumption NR

volume % growth

2006 9,243 1.8

2007 9,884 6.9

2008 9,726 -1.6

2009 9,232 -5.1

2010 9,703 5.1

2011 10,263 5.8

2015 12,313 6.1

2018 12,809 1.3

Consequences of alternative GDP scenarios

Base: GDP scenario as described above

Optimistic scenario: higher growth than

in the base scenario

Pessimistic scenario: lower growth than

in the base scenario

Growth in world GDP,alternative scenarios

-3

-2

-1

0

1

2

3

4

5

6

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

%

data base optimistic scenario pessimistic scenario

NR consumption 2018:NR consumption 2018:between 12.6 and 13.0 million tonnesbetween 12.6 and 13.0 million tonnes

6

7

8

9

10

11

12

13

14

15

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

mil

lio

n t

on

nes

data base optimistic scenario pessimistic scenario

The role of the IRSG

The IRSG is the only public organisation providing

appropriate forecasts for the rubber industry.

This is most important in the current uncertain

situation.

The IRSG needs support and membership from all

governments and industries involved in rubber and

rubber products in order to be able to provide this

service for optimal public and private planning .

Thank you!