Stakes high as global NR industry urgently seeks alternate supply

If the global natural rubber industry had a financial portfolio, an adviser would tell it to diversify—because the stakes could not be higher.

The need to find alternative sources for NR is especially pressing for domestic rubber processors and tire manufacturers, as the existing, 15,000-mile supply chain for hevea natural rubber has become increasingly fragile.

"It's like a powder keg," said Whitney Luckett, Simko North America L.L.C. president and founder of the U.S. office of Southland Rubber L.L.C., a Thailand-based producer of NR. "Right now everything is dry, so there are no problems. But when you mix together certain ingredients, it could explode."

Going back in history, the mono-clonal nature of natural rubber has proven tenuous. It came out of the jungles of Brazil, and out of many trees that were shipped to Malaysia, only seven made the trip, Luckett said.

"Most of the commercial rubber industry comes from a single clone, subject to climate change. And if a leaf blight ever made it to Southeast Asia, we are going to be up the creek without a paddle," she said.

As it stands now, demand can be met for NR in spite of supply line challenges.

"The earliest I can buy West African rubber for shipment is in early August," Luckett told Rubber News in late April. "That means a customer might receive it in October."

China is by far the world's largest consumer of NR at about five times what the U.S. uses, according to data provided by Simko.

Of the 12 million tons of NR produced globally in 2021, China consumed 5 million tons and the U.S. consumed 1 million tons.

On the production side, about 91 percent of the world's NR comes from Southeast Asia, about 6 percent originates in West Africa and about 2 percent comes from Latin America.

On the consumption side, Simko data shows that Asia eats up about 76 percent of global supply, with China at 40 percent. Europe and Africa are next at about 12 percent combined; and North, South and Central America are at about 12 percent for all three regions.

In the U.S., about 87 percent of NR goes to the tire industry; about 11 percent is funneled to distributors; and about 2 percent goes to the non-tire rubber industry, according to Simko.

Non-tire has almost no direct imports of NR and often a very limited list of approved distributors, according to Luckett.

"I agree that there may be dark skies on the horizon," said Tor Hough, managing partner with Elm Analytics L.L.C., based just outside of Detroit. "This may be a perfect storm waiting to happen, and it is not going to be fixable by brute force or overnight.

"The natural rubber industry is like a slow-moving freight train—it will take an enormous amount of energy to stop it and change it."

The world's largest tire manufacturers, academic institutions and international suppliers have been at the fore for the last decade-plus in attempting to address other sources of latex.

Bridgestone, with assistance from the U.S. Department of Energy, is making strides with the arid climate shrub guayule, while Goodyear and Continental A.G., with the assistance of the Department of Defense, are analyzing latex yields from dandelions.

Out of thousands of plants studied, it appears the federal government, academia and tire industry have settled on those as the most likely options.

Like many other rubber industry raw materials, natural rubber is not produced domestically.

But unlike other imported raw materials, domestic hevea natural rubber production is prevented by climate, since the hevea brasiliensis tree must grow within about 10 degrees of the equator.

"Domestic production is very important," Luckett said. "But we also have to look toward sustainability. We are sitting right in the middle of climate change, whether a person wants to admit it or not.

"Look at Western Kansas ... we have lost so much rainfall there that the region cannot produce wheat. So we have to look at different crops that can grow in arid conditions.

"Natural rubber has to grow within 10 degrees of the equator, but even there we cannot have horrific climate swings."

According to the Association of Natural Rubber Producing Countries, world production is expected to grow by 1.9 percent year-over-year to 14.1 million metric tons during 2022.

Global consumption of the commodity is set for a 1.2-percent increase to 14.2 million tons, according to an ANRPC report issued March 17.

On the consumption side, demand is driven by the health care sector and some growth in automotive in major countries. As of the end of April, NR sat at about $1,750 per metric ton.

But the farther upstream the issue, the more complex and difficult it is to remedy, according to Hough.

"Everybody tries to identify upstream supply difficulties, and most fail," he said. "The root cause of this condition is a lack of trust between the manufacturer and suppliers. There are some exceptions to this assessment, but not many."

Natural rubber poses an interesting problem, Hough said, because there is a limited supply, geographic constraints that complicate delivery and different applications that require different grades.

The availability of alternative materials isn't well developed at this time—Bridgestone predicts consumer availability of guayule-based passenger car tires by 2030—so short-term interruptions can cause cascading supply chain challenges.

"This isn't a new idea. ... Many raw materials have seen bullwhip and reverse bullwhip effects due to the pandemic," Hough said.

According to Luckett, short-term solutions include airlifting cargo from Asia to circumvent deepwater port delays.

Tire manufacturing companies have not consistently purchased from U.S. distributors of natural rubber in a decade, Luckett said, and no domestic inventories exist to assist them.

First-tier, non-tire distributors have limited inventories, though most were sold to tire companies that needed NR in the last six months, she said.

In the medium term, Simko encourages "strategically-developed, on-shore inventories to avoid further supply chain disruptions," though the company guards against a government stockpile of NR.

Enter guayule and dandelion latex, widely touted as the best long-term solutions.

"I don't think there will be a domestic source online in the next 12 months," Luckett said. "There have got be strides made in yields for both dandelion and guayule to bring them to market."

Katrina Cornish, endowed chair and research scholar for bioemergent materials at Ohio State University, said that tire companies may break through on a commercial scale with their alternate NR studies at some point.

But the first production runs of guayule- or dandelion-based NR will be seen in high-margin, military or medical applications, she said.

"It will be in aircraft tires and premium tires," she said. "More and more will enter premium high-margin products. Commercial tires ... are subject to inflation and commodity pricing.

"(Initial alternative NR) may be in a meteorological balloon, a catheter or a U.S. Navy jet, something that is immune to commodity pricing, and passenger car tires are not.

"A Navy jet costs millions to construct, and I think they will pay a little more for tires so it doesn't fall in the drink on landing."

Natural rubber is essential for peak tire functionality, said Henry Schniewind, head of external communications for the tire business area for Continental.

Between 10 and 40 percent of the total weight of modern high-performance tires still is the natural stuff. "Synthetic rubber cannot compete with the favorable properties of natural rubber," Schniewind said.

Qualities that cannot be matched synthetically include high-impact resistance and durability, "triggered by the elongation crystallization that the rubber exhibits," he said, chemistry that is unique to natural rubber.

William Niaura, director of sustainable materials and circular economy for Bridgestone Americas, agrees.

"Natural rubber is the tire industry's most vital raw material," he told Rubber News.

As Conti furthers its research into the flowering taraxacum kok-saghyz, or the "TKS" species of Siberian dandelion, Bridgestone is extending its research into guayule.

Latex gleaned from the desert plant is "softer, stretchier and stronger" than both dandelion and hevea latex, according to Ohio State's Cornish, one of the preeminent researchers into alternative NR sources.

"It is guayule that is in the lead," she said. "This is because its agronomy has been well-established. The dandelion still has issues, as it is not as sturdy, not as established, not as constant."

A big advantage for the dandelion is that it can be grown indoors.

"Crop failure is a matter of time, so growing hydroponically with vertical gardening indoors is important," Cornish said. "Indoor farming is more expensive than outdoor farming, but the timeline is two months or less for crop growth."

Massive complexes already are producing dandelion crops in Israel and Holland, Cornish said.

"But I would encourage an all-of-the-above approach," she said. "I would like to see all three crops. Dandelions can be grown where guayule cannot, and vice-versa. Hevea is pretty much tropical, while dandelions can be grown as a winter crop.

"But the latex from guayule is a wonderful material. ... There is nothing like it."

Bridgestone has been researching the drought-resistant desert shrub since 2012. Guayule requires 50 percent less water than other native crops like alfalfa and cotton.

The tire maker was the recipient of a grant from the U.S. Department of Energy to further its research into guayule, specifically in Central Arizona where Bridgestone works with local farmers to grow the shrub.

"Guayule shows tremendous potential for advancing the biodiversity of natural rubber sourcing and introducing alternatives to existing crops in water-starved areas such as America's desert Southwest," Niaura said.

The grant from the U.S. DOE Joint Genome Institute—one of many the company has received for its work—will be used to "sequence and map genes of three guayule varieties" at a processing and research center in Mesa, Ariz., as well as a 281-acre farm in Eloy, Ariz.

Facilities and farms in California, New Mexico and in Italy also will serve as research sites.

"After a decade of high investment and intensive research, Bridgestone is increasingly optimistic at the potential for guayule as an alternative source of natural rubber," Niaura said.

To date, Bridgestone has invested more than $100 million in efforts to commercialize guayule. The company produced the first tire made from guayule-derived rubber in 2015.

As part of its partnership with the NTT IndyCar Series, Bridgestone has produced Firestone Firehawk race tires with guayule rubber comprising 100 percent of the sidewall. The tire will be used as the alternate at the 2022 Music City Grand Prix in August.

Continental has been evaluating TKS latex rubber use for nearly a decade, teaming up in 2013 with Fraunhofer Institute for Molecular Biology and Applied Ecology in Aachen, Germany, in a joint venture to produce industrial rubber made from dandelions.

Three years later, that led to a research facility in Anklam, Germany, as Conti budgeted $39 million through 2021 to fund it.

And the "Urban Taraxagum" bicycle tire from Continental has been on the market since 2019, Schniewind said.

"This is the first series-produced tire made with a tread of natural rubber from the dandelion plant," he told Rubber News. "We are confident that in a few years we will also be able to manufacture and market car and truck tires in relevant quantities.

"However, we believe that the natural rubber obtained from the rubber tree will not be completely replaced by dandelion rubber in the coming decades."

Conti unveiled the GreenConcept tire last year, made with a range of renewable materials, including dandelion-latex-based natural rubber.

"Continental currently has no plans for a market launch or series production of Conti GreenConcept," Schniewind said. "However, we will be implementing individual aspects of the study in series production. This applies, for example, to the use of sustainable polyester yarn derived from recycled PET bottles."

Conti is not alone in its TKS research.

India's Apollo Tyres Ltd. and Balkrishna Industries Ltd., China's Linglong Group Co. Ltd. and Japan's Sumitomo Rubber Industries Ltd. all have been involved in research projects to develop rubber from dandelion latex.

In addition, Cooper Tire & Rubber looked at TKS-derived rubber from 2012-17 under a DOD grant.

Most experts agree that replacing (or supplementing) hevea-derived NR in the long run will require government partnerships.

"I do think we need to see public/private partnerships focused on developing those two alternative rubbers, and we are starting to see that with the DOD and other grants," Simko's Luckett said. "The Department of Energy is interested as well, as guayule has proven to be a great source of gas. This aligns with (DOE's) mission and goals as well."

Bridgestone is urging U.S. legislative, administrative and regulatory bodies to include financial incentives within agriculture, energy, transportation and defense to industrialize natural rubber from guayule.

"Creating a domestic source of natural rubber creates jobs, protects the environment and secures a critical natural resource," Niaura said.

Public and private investments will continue to be "significant," Hough noted.

"We will have to scale technical problems to meet needs," Hough said. "We could spend money to solve them more quickly, but it is a matter of priority.

"These partnerships are probably even overdue, as it could be up to seven years before (alternatives) become a reality. ... Maybe that is becoming conflated now, but it is good to see this occurring."

The vast scope of problems that could occur with the loss of natural rubber is a dire prospect, Luckett said.

"The fact that the U.S. is considering this is a good thing—and it just makes sense," she said. "Do we really want (NR) coming from half a world away?"