SINGAPORE—The global surplus of natural rubber will shrink 46 percent in 2015 as demand expands and farmers reduce tapping because of decreasing prices, according to the International Rubber Study Group.
Production will outpace demand by 202,000 metric tons from 371,000 tons in 2014 and 650,000 tons last year, the Singapore- based body said in a recent email. The group said in May the glut this year would exceed the 714,000 tons in 2013 after it increased output estimates for Thailand, the biggest shipper.
Futures plunged 28 percent this year, declining to the lowest level in almost five years in June. Supply increased after record prices three years ago spurred output, while demand slowed as the pace of economic expansion decelerated in China, the biggest buyer. The glut is now contracting as profits decrease for small farmers who represent 80 percent of world supply amid forecasts for record global car sales.
“Small growers across producing regions have started responding to a consistent decline in prices,” said Lekshmi Nair, senior economist at the group. Farmers are showing less enthusiasm for tapping while tire demand is boosting usage, she said in the email. The inter-governmental group has members from producing and consuming nations and industry.
Futures in Tokyo, the global benchmark, plunged to a five-year low of 190.3 yen a kilogram ($1,858 a ton) on June 5 after reaching a record 535.7 yen in February 2011. The January contract rose 0.3 percent to settle at 197.5 yen today, reversing a 1-percent decline to the lowest level since June.