Rubber prices hit record high
 

by Gamini Warushamana

Natural rubber prices have hit a record high and are on the increase in global markets due to the surging demand in Asia, high crude oil prices and resulting short supply and higher price of synthetic rubber.

Crepe rubber prices escalated to a record high of Rs.345/Kg on Tuesday and jumped to Rs. 390 on Thursday at the Colombo Auction last week.

Market sources said that crepe rubber prices for August delivery were Rs. 400kg. Rubber prices are on the increase from January this year and at last Tuesdays auction, scrap rubber and sheet rubber fetched Rs. 212/Kg and Rs. 218/Kg. The price increase during the first five months for crepe rubber, scrap rubber and sheet rubber are 158%, 43.2% and 34.6%.

The unusual price escalation of crepe rubber is due to the beginning of the rainy season which results in a supply constraint, market sources said.

The global rubber price increase is fuelled by high demand in Asia. China has become the world's largest rubber consumer surpassing the United States by 15% last year. The demand in China and India is increasing continuously.

Director of the Rubber Research Institute (RRI) Dr. A. Thilakarathne said that the increase in crepe rubber prices to this level is not healthy in the long run. Crepe rubber is now over 100% more expensive than synthetic rubber and this would lead to manufacturers moving to synthetic rubber as much as possible.

Dr. Thilakarathne said that this trend will continue for many years and this is a great opportunity for Sri Lanka, if the country can extend rubber cultivation and increase production.

The International Rubber Study Group (IRSG) meeting held recently in Indonesia has projected that by 2020 there will be a three million tonne shortfall of natural rubber in the world. The projected demand and supply by 2020 is 13.5 million tonnes and 10.5 million tonnes.

All rubber growing countries represented at this meeting said that increasing the capacity in their countries is limited and there will not be a large additional supply by 2010. Vietnam and Ivory Coast are the only countries that have plans to increase supply and their additional supplies will be 1.2 million tonnes and 0.34 million tonnes, Dr. Thilakarathne said.

However, the challenge Sri Lanka faces is not supplying to the world market but produce to meet the local demand. According to statistics in 2005 Sri Lanka imported 15,000 MT of rubber at a cost of Rs. 4 billion.

Our exports have been very small during recent years and our industrialists will not be able to compete in the international market by using imported rubber, Dr. Thilakarathne said.

To take advantage of this opportunity, Sri Lanka should extend the acreage under rubber plantations immediately as there is a potential in the country, planters said.

The government's focus is on the dry zone, specially in the Moneragala district. RRI said that they have developed new clones to suit the dry zone and they have been successful.