Short supply has pulled up natural rubber costs to an all-time high in China. Quotes are expected to continue increasing this year, albeit at a slower rate.
The cost of natural rubber has soared substantially in recent months. The rise is so steep that the price increases finished goods makers have implemented are not enough to cover the additional outlay.
In April 2010, natural rubber stood at around 25,000 yuan ($3,800) per ton. Prices rose shortly after and peaked at roughly 43,000 yuan ($6,560) per ton in February 2011, an all-time high in China.
While current prices have fallen to approximately 35,000 yuan ($5,460) per ton, they are still 44 percent higher year on year.
The significant rise in rubber costs came as a result of low yield. Yunnan, one of China's major rubber producing provinces, experienced severe drought last year that affected production. Indonesia and Thailand, on the other hand, were drenched in heavy rain.
Wang Jianhui, analyst at Southwest Securities, said the weather so far for this year has been good for rubber production. Rubber tapping has started in April and new natural rubber output from Yunnan and Hainan provinces, and Southeast Asia will be released soon.
This is expected to slow the pace of price increase, but not stave off any future upward adjustments. Statistics from the International Rubber Study Group show global consumption of natural rubber for 2011 is likely to rise 5 percent year on year to 11.15 million tons. And while worldwide output is forecast to grow 7 percent to 10.97 million tons, the expected yield will still be 180,000 tons short.
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