20150307_BSC_Vietnam Sector Research_EN_Rubber Sector_ICB1353

Major rubber producers to cut exports: On Feb 4th /2016 , the International Tripartite Rubber Council (ITRC) including Thailand , Indonesia and Malaysia agreed to cut exports of natural rubber by total 615,000 tonnes , in the period of 6 months starting on march 1st 2016 . This move aimed to boost up rubber prices, which was already at the bottom of the last 6 years. The reduction was equivalent to approximately 6% of global natural rubber output of 2015, equal to two times the level of estimated oversupply in 2016 , and 23% of the current global rubber stock. Specifically,Thailand cuts 324 thousand tons (about 9 % of exports in 2015); Indonesia cuts 238.7 thousand tons (about 34 % of exports in 2015) , and Malaysia dropped 52.3 thousand tonnes (2% of exports in 2015 ) .

As the result, rubber prices has recovered quickly and reached $ 1.22/kg, as of March 4th 2015, which is equivalent to an increase of 13 % from the day IRTC announced this policy, and less than 8.9 % compared to the average price in 2015. According to the price of the future transaction at the TOCOM, Japan, the price of rubber futures contract increases from 160.8 yen / kg in March to 174.6 yen/kg in August, an increase of 8.5 %.

BSC assessed that the natural rubber prices may recover in 2016 due to expory cuts of ITRC. However, since production cuts last only for 6 months, the impact on rubber prices are just short-term and long-term outlook for the sector remains negative due to weakening demand from China.