Amid the rise of urbanization in states that produce natural rubber (NR), the supplies of the material may be altered as the trend can shift opportunity costs. Natural rubber expert and editor of The Rubber Economist, Prachaya Jumpasut discussed and analyzed the trend.

In 2017, given expanding production capacity on an international level, the increase of natural rubber gained a lot of industry attention as it was seen at risk.

It goes beyond saying that the growth of the natural rubber on the market witnessed in recent years resulted in the overall international rubber manufacturing expansion, however, a long-term rubber shortage has been recorded amid the situation.

Prachaya Jumpasut says that one may see this trend as absurd, but the increased demand has its explanation – Asian states witness continuing growth of income and population; thus, it results in increase in tire and rubber consumption, which enables expansion of industries that manufacture end products using natural rubber.

The saturation effect that has been recorded in North America and European countries is muted thanks to intense expansion of Asian market. Moreover, it leads to ongoing rubber demand increase on a global scale.

It is projected that NR supplies will drop due to growing opportunity costs in key states-manufacturers.

The cost of rubber is anticipated to hit as low as $6/kg previously recorded in 2011, and rubber acreage will keep on expanding.

There is a warning that NR will be in shortage in the future, although experts seen potential for further growth in output in smaller manufacturing states.

New prices, as well as alternative incomes influenced the resolution to plant and tap rubber trees. But, seemingly, the plan is now gone as it will require land, funding and workers. When the economic development only start to emerge, it is very cheap to produce natural; tappers do not abandon plantations for the work in the city as their income will be not high enough.

The industrialization of the state results in the increase of wages, thus rubber production becomes more expensive as recruiting workers will require higher cost.

And the growth of opportunity cost is unavoidable in all rubber manufacturing states; it is just a question of time.

The uniqueness of NR is attributed to the fact that key manufacturing states are ranked as one of the fastest expanding economies in the world. The increasing demand, but declining supplies will lead to shortages in NR sector. Malaysia has already seen decline in production and Indonesia, Thailand and Vietnam will soon show the same trend.

Therefore, there is a chance that the application of substitutes including synthetic rubber, guayule and dandelions will increase. Guayule and rubber dandelions may be used to develop natural rubber, as some tests by tire producers showed. Nevertheless, the viability of the materials is still discussed.

Article by Rubber and Plastic News