Will the rubber trade bounce back from the current slump?
Rubber's unique physical and chemical properties make it an essential commodity for several industries. From erasers to pipes, to hoses, and even vehicles could not move without this quintessential substance.
Natural Rubber is a polymer, just like plastic, that comes from the rubber tree. It was discovered in the Amazon rainforest and quickly became a powerhouse for the Brazilian economy. A white-colored milk-like substance called latex found in the tree is used to create rubber. Synthetic rubber which is made using petroleum can be used interchangeably with rubber for some of its uses. So prices of rubber are affected by their make in either petroleum or crude oil. The rubber trade industry was worth $12.7 billion in 2020 and the current rubber import export data suggests that the numbers are only increasing.
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Highlights from rubber’s resilient history
Rubber has been used long throughout human history owing to its elastic and flexible qualities. Being a polymer, it can be manipulated into any shape or size. It was used in 1600 BC by Mesoamericans in liquid form as a medicine that stops bleeds; for rituals; and for painting. Christopher Columbus is credited with bringing it to the Western world. Natural rubber had certain limitations like temperature sensitivity. It would get sticky in high temperatures and brittle in the cold. This was rectified by the vulcanization process in 1839 by Charles Goodyear.
Rubber: Export analysis
Since the plant was native to the amazon forest, it requires a very specific set of conditions to cultivate and grow. The plant needs consistently high temperatures and high levels of moisture to thrive. The conditions are met near the equator and especially in Southeast Asia where the overwhelming majority is produced. Thailand also has excellent farming practices which made it the biggest exporter of the commodity. Indonesia was second but has fallen back in the past two years due to the poor quality of its material and many other reasons. The Ivory coast had French-owned rubber plantations that were abandoned and taken up by the natives. Malaysia was the second country that led rubber production and replaced Brazil. According to the latest rubber export data, it is still a leading producer.
Top exporting countries (2020)
- Thailand ($3.66 nillion)
- Indonesia ($3.31 billion)
- Cote d'Ivoire ($1.27 billion)
- Malaysia ($901 million)
- Vietnam ($849 million)
Rubber: Import analysis
The US, China, and Japan have huge automotive industries which require rubber for making tires. They also have processing plants that create all kinds of products from the commodity. Due to a lack of rubber production within borders, they depend on imported rubber. Malaysia and Vietnam import processed rubber for the production of goods. This is because they have traditional goods which used to be produced with the local rubber supply. They no longer have efficient processing plants that manufacture usable materials from the raw latex of rubber trees.
Top importing countries (2020)
- China ($3.12 billion)
- Malaysia ($1.41 billion)
- United States ($1.23 billion)
- Japan ($819 million)
- Vietnam ($648 million)
Rubber: What’s in store?
COVID restrictions and disruptions in China are expected to affect rubber prices as the country is the leading importer of the commodity. Over the past two decades, rubber prices have skyrocketed globally only to slump to about one-fifth of previous highs. Currently, rubber prices are at a two year low due to a mismatch between demand and supply. As the world still needs the material for all its uses, the trade is sure to pick up. When it picks up is dependent primarily on the next big COVID wave in China.