Shen Jinrong, President of Zhongce Rubber Group Co., Ltd.
The rubber price is determined by supply and demand. In my opinion, we shall not have too much expectation for fall of rubber price.
Firstly, from the perspective of supply, a favorable turn once appeared in 2014, the price relations between natural rubber and synthetic rubber reversed for almost the whole year, China’s consumption of natural rubber increased by 600,000 tons compared with that in the last year, which changed the imbalance between supply and demand accumulated since 2003 and basically reached balance between supply and demand. This can be verified in import volume and apparent consumption of natural rubber. In 2014, China’s apparent consumption of natural rubber exceeded 5 million tons for the first time, which was never seen in the history and even reached over 45% of the global total supply. At that time, the insiders thought that the price trend of natural rubber should level off. However, the nation released new standard on compounded rubber at the end of 2014, affected by the new standard, the industry had extremely high prediction for rise in price of natural rubber. But at the same time, the price of synthetic rubber continued to decline due to sharp fall of international oil price. Under the influence of these
two, from the first half year of 2015, the actual usage of China natural rubber fell to make the supply-demand relationship change again, the price relations between natural rubber and synthetic rubber also reversed again, which resulted in continuous fall in price of natural rubber.
Secondly, from the perspective of demand, the demand for natural rubber declined. 70% of China’s total demand for natural rubber is for tire, in which that for all-steel tire accounts for over 60%, therefore, the output of all-steel tire decides the demand of China for natural rubber. At present, China’s consumption of natural rubber accounts for 1/3 of the global total con- sumption, therefore China’s demand for natural rubber also decides the global consumption of natural rubber. According to the statistics of China Rubber Industry Association (hereinafter referred to as CRIA), from January to October 2015, the tire output of major tire enterprises had a year-on-year (same below) decrease of 6.70%, in which the output of all-steel tire had a decrease of 6.69%; but according to the result of market research, the average rate of operation of all-steel tire was only 65%. Under such a depressed condition, tire industry also suffered from severe influence of the U.S. “Double Anti” and foreign market downturn. According to the statistics of the Customs, from January to October 2015, 1,458,000 tons of Chinese passenger car tires were exported, with a decrease of 8.1%; 2,589,000 tons of truck and bus tires were exported, with a decrease of 0.4%, in which 268,000 tons of passenger car tires were exported to the U.S., with a decrease of 44.6%; 495,000 tons of truck and bus tires were exported, with a decrease of 9%. In addition, in 2015, the U.S. reexamined the “Double Anti” against Chinese off-road tires and largely increased the tariff, the tax rate of some enterprises increased by over 5 times, which almost cut off the opportunity for exporting to the U.S. market, however, off-road tires had huge demand for natural rubber.
Therefore, in my opinion, to increase the price of natural rubber, the nation shall reason through the policy and firstly increase the demand for natural rubber instead of through the confrontation between upstream and downstream and the suppression of downstream. Since July 2015, the number of imported compounded rubber dropped sharply, however, the price of natural rubber still “fell endlessly”, which also verified this reason. In addition, the plantation of natural rubber has its cost and the rubber tappers have to live, once the price of natural rubber is far below the cost, the rubber enterprises will have industrial transfer. Therefore, the upstream and downstream enterprises of rubber industry have to unite in a concerted effort to support the natural rubber industry and promote the consumption of natural rubber with the law of market economy and international convention, which is the only right way.
