Hainan Natural Rubber Industry Group
High rubber prices until 2011
Shortage has dropped the cost of Natural Rubber to a record high in China. Contributions are expected to increase further this year, albeit at a slower pace.
The cost of natural rubber has increased considerably in recent months. The climb is so steep increases in prices of finished goods manufacturers have implemented are not sufficient to cover the extra expense.
In April 2010, natural rubber stood at around 25,000 yuan (3,800 dollars) per ton. Prices went up shortly thereafter and peaked at about 43,000 yuan ($ 6,560) per tonne in February 2011, a record high in China.
While the current prices have fallen to around 35,000 yuan ($ 5,460) per tonne still 44 percent year on year.
The significant increase in the cost of rubber was the result of poor performance. Yunnan, a province of more rubber China's major production, experienced a severe drought last year that affected production. Indonesia and Thailand, by contrast, were soaked in rain.
Wang Jianhui, an analyst at Southwest Securities, said the weather so far this year has been good for rubber production. Exploitation Rubber was started in April and the new output of natural rubber in Yunnan and Hainan, and Southeast Asia will be launched soon.
This is expected to reduce rate of price increase, but not prevent the upward adjustments in the future. Statistics from the International Rubber Study shows global collective consumption of natural rubber for 2011 is likely to rise 5 percent year on year to 11.15 million tons. And while global production is projected to grow 7 percent to 10.97 million tons, the expected return will be 180,000 tons short.
Significant impact on the tire industry
Tires are one of the most affected by the high cost, especially because the product is 80 percent natural rubber. The material, in fact, represents 40 to 50 percent of the total cost of the unit. Due to the rising cost of rubber, suppliers have had to increase export prices three times this year. Quotations are now 15 to 20 percent higher than at the end of 2010.
However, this adjustment is only half the increase in costs of natural rubber. This has forced several small tire suppliers in the province of Shandong to close, while others have opted to temporarily suspend production.
Shandong Jinyu Group is one such company. The tire manufacturer was at a festival in extended spring break in February, resumed operations three days after official holiday period. Some companies closed their factories for an additional period of 20 days. These providers believe that the high cost of rubber, more money is lost with each cycle of production.
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