Natural Rubber market review

May
After the sharp fall in prices during the previous month, which continued during the first week of May, the decline was arrested to some extent by a reduction in production in the following weeks as a result of rainy weather. Strong demand and improved market sentiment, also, gave support to prices. Compared with levels on 29 April, the price of SMR 20 increased by 30.0 sen/kg or 2.2% to close at 1 380 sen/kg whilst latex concentrate closed at 943.5 sen/kg, declining 32.0 sen/kg or 3.3%. The price movements of selected grades of rubber in May are shown in Table 1. The market was quiet and prices continued to fall at the beginning of the month. The prices drifted lower in quiet trading as most prospective buyers preferred to stay on the sidelines. They began to recover on 10 May as more consumers returned to the market after the long Golden Week during the first week of the month. Then, the market turned steady amid fresh concern about nearterm supply tightness due to continuous rain in

recent weeks. Sentiment was aided by improvement in demand from major tyre manufacturers and low inventories in China. Rubber inventories monitored by the Shanghai Futures Exchange (SHFE) stood at 5,065 tonnes during the period, the lowest in at least two years. The Association of the Natural Rubber Producing Countries (ANRPC) reported that the total rubber supply from its nations is expected to rise only 5.8 % this year against 6.2 % projected earlier. The production estimates were lowered as Thailand, the worlds largest producer, may have a lower production of 3.43 million tonnes. Meanwhile, The General Administration of Customs reported that Chinas natural rubber imports in April rose 28% from the same month last year to 175,203 tonnes, although April imports were down by 18% from March when 213,390 tonnes were imported. The market then took a breather as the market turned quiet with most still on the sidelines in anticipation of lower prices as the wintering season comes to an end in major producing countries. In the Tokyo rubber futures, prices inched higher but gains were limited by weaker oil prices and further signs of a slowdown in

Table 1: Prices of SMR CV, SMR 20 and Latex Concentrate, May 2011
SMR CV sen/kg Highest Lowest Average Change from the last day of the previous month 1,647.00 1,585.00 1,602.35 -57.50 RM/tonne SMR 20 sen/kg RM/tonne 13,800.00 12,870.00 13,343.30 300.00 Latex Concentrate sen/kg 968.50 931.50 943.33 -32.00 RM/tonne 9,685.00 9,315.00 9,433.30 -320.00

16,470.00 1,380.00 15,850.00 1,287.00 16,023.50 1,334.33 -575.00 30.00

Note: * Official price of latex concentrate in bulk, 60% DRC Source: Malaysian Rubber Board 1

2011 MAY

MRB Daily Noon Prices, May 2011

1,500 1,450 1,400 1,350
1,300 1,250
sen /kg

SMR 20

1,200 1,150 1,100 1,050

Latex in Bulk
1,000

950 900 850

10

11

12

13

16

18

19

20

23

24

25

26

27

30

31

SMR 20 and Latex ( in Bulk,60% DRC) Noon Prices 1 June 2010 - 31 May 2011
1,780 1,720
1,660 1,600 1,540 1,480 1,420

SMR 20

1,360 1,300
sen /kg

1,240 1,180
1,120 1,060 1,000 940 880

Latex in Bulk

820 760 700

640 580
Jun 10
Jul Aug Sept

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May 11

Chinas demand. China, the worlds largest consumer and importer of natural rubber, has been slowing its demand in recent months due to tightening measures by Beijing to curb inflation. Towards the end of the month, a mild rebound was seen as short covering activities supported the uptrend. Demand by major consumers were evident with notable off-take was noted from buyers in Europe.

domestic demand is expected more significantly than exports in Malaysia and neighbouring Indonesia in 2011 and 2012. The April 2011 World Economic Outlook shows that net capital inflows to emerging economies are highly correlated with global financing conditions with global interest rates and risk aversion playing an important role. - New Straits Times, 5 May

Outlook
Although the prices appear to have recovered or their declines somewhat arrested in May, the outlook for the near term is one of quiet activity. Further consolidation of prices is expected as major consumers may be sidelined in anticipation of lower prices as supplies return to normal in producing countries. Malaysia among seven economies to drive regional growth Malaysia is among seven countries tapped to kickstart the Asian Century a scenario in which these economies would spur growth in Asia. In a report titled Asia 2050, the Asian Development Bank (ADB) said the other six economies were China, India, Indonesia, Japan, South Korea and Thailand. The Manila-based regional financial institution said that by 2050, these seven economies would account for 45% of the global GDP with average per capita income of US$45,800. That would be 25% higher than the global average of US$36,600. Malaysia was part of the ADBs classification of fast growing converging economies, which included Armenia, Azerbaijan, Cambodia, China, Georgia, India, Indonesia, Kazakhstan, Thailand and Vietnam. - The Star, 5 May China drives demand for cars China could account for half of the worlds newcar market by the end of the decade, according to industry experts. The worlds most populous country already boasts the biggest car market globally but its gap to second-placed North America is expected to widen dramatically by 2020. China achieved a global record new-car sales figure of 18.06 million vehicles in 2010. The countrys manufacturers and officials are predicting that number will grow to 40 million by 2020. 3

News Brief
Malaysias rubber exports set to grow by at least 10% this year The outlook for the Malaysian rubber industry is getting rosier with exports set to rise by at least 10% this year from RM16.028 billion recorded last year, driven by continued strong demand, thanks largely to the global economic recovery. Against such a backdrop, International Trade and Industry Minister, Datuk Seri Mustapa Mohamed has asked the industry to take advantage of the pick-up in demand by being ready with competitive products sought by major importing countries. Malaysias rubber trade performance for the first two months of this year improved by 16.3%, indicating a positive outlook for the rest of the year, he added. -The Sun, 4 May Malaysia economy likely to grow 5.5% this year The Malaysian economy is likely to grow by 5.5% this year before slowing to a 5.2% growth next year, says the International Monetary Fund (IMF). Unlike the rest of the Asian region, private

The world market is expected to be about 80 million vehicles in 2020, which means that every second new car sold in the world would be in China. -www.factiva.com, 7 May Ringgit is getting stronger, US$ to continue decline The ringgit, Asia's best performing currency since last year, is expected to strengthen further on the weakness of the US and its economy. RAM Holdings Bhd Group Chief Economist, Dr. Yeah Kim Leng, said that the Government was on the right track in raising the overnight policy rate (OPR), which would increase the likelihood of the ringgit strengthening further. He said the ringgit would strengthen to RM 2.90 to the US dollar by year-end because the growth prospects in the United States' economy were still dim. -The Star, 10 May Toyota to resume Chinese production in June Toyota has announced that it will resume production in China during June, reports Xinhua, quoting Toyota Motor China Investment Company. The carmaker says that a recent company-wide review indicated that production will recover to normal levels at its Chinese factories in June. Meanwhile, Lexus and other imported Toyota vehicles will also become available in China again next month, but deliveries of some models might be delayed, the company says. Japan's largest automaker said on 6 May 2011 that its sales fell 23% last month from a year earlier to 48,700 vehicles in the worlds largest automobile market. -www.factiva.com, 13 May

Chinese carmarkers predict sales rebound Automobile sales in China may continue to grow slowly this year through the second quarter before rising in the second half, said Wang Dazong, President of Beijing Automotive Industry Holding Co. "I think it will pick up later this year and end up at about 10%," Wang said in an interview in New York. Beijing Auto is the Chinese partner of Daimler AG and Hyundai Motor Co. Chinese automakers are seeking to boost sales as competition rises at home, with foreign carmakers introducing local models even after the nation ended tax breaks and subsidies, which helped propel the country past the United States as the worlds largest automobile market. - China Daily, 13 May Vietnam rubber exports hit 782 200 tonnes in 2010 Worlds fourth largest rubber exporter, Vietnam, achieved a new record in shipments last year with 782 200 tonnes of worth $2.38 billion. According to Vietnam Rubber Association (VRA) the figure represented an increase of 6.9% in volume and 94.7% in value. VRA, however, said that the quality of the countrys natural rubber exports must improve in order to be competitive in the global market, which has high demand for the product. - www.factiva.com, 13 May Malaysias April vehicle sales increase 4.4% to 50,936 units Vehicle sales rose 4.4% to 50,936 units in April from 48,812 units in the same month last year, according to the Malaysian Automotive Association (MAA). However, vehicle production slipped 24.7% to 37,419 units in April due to downward adjustments in production due to supply interruption of some original equipment components caused by the massive earthquake 4

and tsunami in Japan in March. Despite this, consumer sentiments for new vehicles remained stable in April, the MAA said in a statement. -The Star, 14 May MAI expects one million total vehicle sales in 2020 The Malaysian automotive total industry volume (TIV) is projected to hit one million units by 2020, according to the Malaysia Automotive Institute (MAI). By 2020, I think we can hit a TIV of one million, said Chief Executive Officer, Madani Sahari, adding that the forecast was in fact a conservative one, underpinned by inevitable factors that would spur the demand for vehicles in Malaysia over the next eight to nine years. Madani noted that from 2005 to 2010, the Malaysian TIV recorded a compounded growth of about 10%. Total vehicle sales hit an all-time high of 605,156 units in 2010 from its previous high of 552,316 units in 2005. -The Star, 16 May New Continental plant to enhance Asian growth Continental AG, the world's fourth-largest tyre maker by market share, opened its first tyre manufacturing plant in Hefei city in Anhui province on 18 May 2011, to meet rising demand from the world's largest automobile market. The German tyre giant invested more than 185 million euros ($262 million) in the Hefei plant, which will have an initial annual production capacity of 4 million units. The facility will be further expanded with continuous investment in the future to achieve a long-term annual production target of 16 million tyres. The company currently operates 1,400 authorized retail stores in China, including its latest in Changzhou, Jiangsu province. - Auto China, 19 May 5

Michelin drives up investment in China China will be the major investment destination for French tyremaker Michelin SA in the next three years, with plans of expanding production and enhancing research and development (R&D) capabilities, said the company's top executive. "We are planning a 1.6-billion-euro ($2.26 billion) investment in emerging markets in the next few years, including China, Brazil and India, as we see huge potential there to further drive our future development," said Michel Rollier, General Managing Partner of Michelin Group. - Auto China, 24 May Indonesia makes full-fledged attempt to revive rubber plantations As rubber production dwindles and its producers searching for alternative crops, governments have put rubber on fast track, especially Indonesian government, which is worried that despite the country being currently the worlds second largest producer of natural rubber, its rubber output per hectare is still far lower than other rubber producers in Southeast Asia such as Malaysia and Thailand. The government is seriously considering suggestions from various quarters to improve the funding of small rubber plantations and improve planting policies. - Commodity Online, 25 May ANRPC sees 2011 Natural Rubber output growth 5.8% vs 10.5% previously The Association of Natural Rubber Producing Countries (ANRPC) revised lower its forecast for growth in production during the second quarter to 5.8% from 10.5%, citing lower-than-expected production in countries such as Indonesia and the Philippines. It also revised lower its forecast for natural rubber output growth in 2011 to 4.9% from 5.8%, compared with actual growth of 6.4% in 2010. ANRPC members are likely to produce around 9.93 million tonnes rubber this year, much lower

than the earlier forecast of 10.02 million tonnes, the association said. - Dow Jones Newswires, 27 May Price of natural rubber in Indonesia forecasts to hover at US$4.50 The prices of natural rubber in Indonesia is predicted to continue to hover high around US$4.50 per kg this year as supply continued to fall short of demand. Price stability is expected only in 2012 when supply and demand reach new balance, said Asril Sutan Amir, the Chairman of the Indonesian rubber companies. Asril said rubber price could still scale up higher to reach up to US$5 per kg when the price is stable in 2012. - Asia Pulse, 30 May Sumitomo to build tyre plant in Brazil Sumitomo Rubber Industries Ltd. plans to spend $345 million to build a radial passenger tyre plant in Brazil as part of the firms global expansion strategy. The plant will have a projected capacity of 15,000 tyres a day and be built on a 124-acre site near Fazenda Rio Grande City in Brazils Parana State. Sumitomo said it hopes to begin construction on the project early in 2012, with production scheduled to begin by October 2013. - Rubber & Plastics News, 30 May

Malaysias NR imports by countries March 2011 p

Thailand 66.2%

Others 10.1%

Indonesia Vietnam Cambodia 2.3% 1.8% 0.5%

Thailand 64.1%

Myanmar 6.0%

India 5.1%

Philippines 8.0%

February 2011p

Others 9.6% Indonesia 0.7% Vietnam 4.4% Cambodia 1.3% India 4.2% Philippines 8.5%

Total: 58,830 tonnes

Myanmar 7.1%

Total: 54,020 tonnes

Malaysias NR exports by countries March 2011 p

China 53.6%

Others 26.2%

Turkey 2.3%

Canada 0.8%

February 2011p

Taiwan 1.2% Brazil 2.8%

Iran 0.1% France 1.5%

USA 3.1%

Germany 7.0% South Korea 1.5%

Total: 111,020 tonnes

Note: P = provisional

Total: 69,638 tonnes

Malaysias NR exports by types March 2011 p

SMR 95.9%

RSS 0.4%
February 2011p

Others 0.3%

Latex 3.4%

Total: 111,020 tonnes

Total: 69,638 tonnes

Malaysias NR consumption by sectors March 2011 p

Gloves 67.1%

Other products 12.4% Rubber Compound 0.4% Rubber thread 12.2%

Tyres & Tubes 7.9%

February 2011

Total: 36,161 tonnes

Note: P = provisional

Total: 30,773 tonnes

Published by the Malaysian Rubber Board, 148 Jalan Ampang, 50450 Kuala Lumpur, Malaysia. Tel: 603-9206 2000 Fax: 603-2161 6586