HANOVER, Germany—A reduction in tapping activity as well as severe wintering season in Thailand will push natural rubber prices up for the next two quarters in 2017 before commodity surplus weighs in on the market again, according to Rubber Forecasts consultant and analyst Hidde Smit.
Speaking during the Tire Technology Expo in Hanover in February, Smit said tapping intensities were going down in NR producing countries, mainly because of lower prices since 2013, below $2.00, and heavy floods earlier at the beginning of the year in the biggest producing country, Thailand.
"In Thailand the wintering period starts in February and we had floods first. And I've been told by people in the industry that if you have floods first and then the wintering period, the period will be most severe and longer, taking longer to dry out and to recuperate," explained the former secretary-general of the International Rubber Study Group.
In view of the rising demand and a slowdown in tapping, the expert forecast that NR prices in the coming two quarters of 2017 would go up to around $2.45/kg.
But then, he expects prices to go down.
"That is because the Thais will come back tapping and maybe some of the other countries think there's hope and they continue tapping. And then that's when you have this big surplus again weighing on the market," he said.
Smit added NR prices will decline slightly for a few years and then recover, when the peak in surplus production is over.
"By around late 2020s, depending on the consumption and planting scenarios, NR prices will reach $3/kg," he said.