LONDON—A sixth year of global surplus may depress rubber prices through 2016 as maturing trees boost production and slowing growth reduces demand in China, the biggest consumer, according to an industry adviser.
Supply will outpace demand by 316,000 metric tons in 2016, compared with 483,000 tons in 2015, according to London-based The Rubber Economist. The adviser increased its forecast for this year's glut by 78 percent in March as output in Thailand, the largest grower and exporter, surpassed predictions. The International Rubber Study Group also raised its estimate saying production will increase as trees planted between 2006 and 2008 mature.
Futures in Tokyo, the global benchmark contract, have tumbled 26 percent this year, touching a four-year low in April. Lower prices may boost earnings at tire makers including Pirelli & C. SpA and Bridgestone Corp., while squeezing profits for small farmers who account for about 80 percent of world supply. China's economy is forecast to grow 7.3 percent this year, the weakest pace since 1990, based on the median estimate in a Bloomberg survey.
“The natural rubber market may remain in surplus until 2016,” Prachaya Jumpasut, managing director of The Rubber Economist, said in an e-mailed response to questions from Bloomberg. “Prices may remain bearish until then, unless demand picks up faster than I anticipate in China and other major consuming countries.”