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August 22, 2005 02:00 AM

Consumption of NR, SR to grow in China

Mike McNulty
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    Like many in the rubber industry, Hidde P. Smit has China, a natural rubber shortage and escalating prices on his mind.

    China is the top consumer of natural and synthetic rubber in the world, spurred in part by strong growth in the tire industry, said Smit, who in January became secretary general of the International Rubber Study Group.

    He expects China to consume 22 percent of global natural rubber and 35 percent of synthetic rubber production by 2015, with, again, a major portion gobbled up by its tire sector.

    The U.S. was the top rubber consumer in the world until 2002, but has experienced little growth in the last 15 years, he said. It is the second largest consumer behind China, Smit said.

    China's own NR production probably won't rise above 600,000 metric tons a year because of limited available land, but it will make significantly more SR in the future, although it's difficult to make a prediction, according to Smit.

    In fact, production of NR in the country actually may fall because of crop switchover, infrastructure and numerous other factors, including failure to replant, although it is working on that now, he said.

    The official discussed the issue while attending the International Latex Conference in Charlotte, N.C., July 26-27.

    Smit, who presented a paper at the conference on rubber latices and discussed the IRSG, expects NR to be in short supply for some time.

    ``It depends when natural-rubber-producing countries put new trees in the ground. If they do it next year, then it will be seven to eight years before they produce. It also depends on how much NR is replaced by SR,'' he said

    Supply down, demand up

    There will be more demand across the globe and supply won't catch up, the secretary general predicted. Production possibly will be about 10 million tons by 2020, and by then it should be in the 12 million-ton range to meet demand, he said. ``It could also be less than 10 million tons. It all depends on the actions countries take'' in the near future.

    He predicts that NR prices will rise to $2 per kilogram within a few years. Some Rubber Smoked Sheet 3 prices have gone from $1.20 at the start of 2005 to $1.80 in July because of short supply in Thailand.

    Smit also said a change may take place among producer nations.

    Rubber crop production in both Malaysia-expected to rise to 1.15 million tons this year from 1.08 million tons last year-and Thailand, which has leveled off at about 3 million tons a year, could be on a downward trek because they have failed to replant in a timely manner. But Smit said he believes Indonesia and Vietnam could become big players while India also may be a strong producer in the future.

    India's production, however, primarily is for domestic use, he said, and Brazil and Guatemala are doing well and could have an impact on the industry.

    Productivity is lower than it should be in Indonesia, the No. 2 NR producer, and many areas are overdue for replanting and high-yielding clones, he said.

    Some progress has been made and production should reach a projected 2.15 million tons this year from 2.07 million last year. That's up from 1.5 million tons in 2000, according to Smit.

    Production should continue to climb, he said, but the country needs to set up a yearly planting program to dramatically improve productivity.

    Vietnam has great potential but availability of land is a problem, he said. By 2020, the IRSG anticipates the nation could produce 750,000 tons of NR yearly.

    Political woes a factor

    Political problems put a big question mark over Africa. The continent's output could grow by 2020, depending on the country producing the NR, and produce a few hundred thousand tons. About 350,000 tons a year are produced in Africa.

    ``We told the people in Asia it was time to replant when prices were low in 2000, just after the Asian crisis, at 50 cents a ton,'' he said. ``And we predicted that prices would rise to at least $1.50, perhaps $2 in the future.'' So far the IRSG has been on the money.

    In terms of usage, consumption has slipped in Europe because of a number of factors, including little expansion and industry moving production to the east or to Asia, he said.

    That situation likely will remain that way for some time in the future, ``but that's difficult to predict,'' the IRSG official said. ``It's not much different in the U.S. and North America,'' he added. ``Growth has been small, if there is any growth at all, and I suspect that will continue.''

    Before becoming secretary general of IRSG Jan. 4, Smit was the managing director of the Economic and Social Institute at Free University in Amsterdam from 1995 to 2004. While there, he served as a consultant for a large number of companies and international organizations.

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