In 2020 the price of rubber is not easy to rise, but once the price has risen from its lowest in 2019 then with a good supply and demand structure in 2020 the price will rise again.
The structure of supply and demand has not changed, the potential for rubber production in the last 10 – 20 years is increasing, but the growth of production capacity from regions and producing countries is limited so that excess inventory does not change drastically in 2020.
Weather in 2020 is expected to be normal; forecasts for abnormal weather in 2020 are not expected.
In terms of demand will improve because the motor vehicle industry will come back because it is supported by policies in China, especially for heavy trucks will increase due to new demand. Thus the demand for tires in 2020 will continue with the development of exports in the past year.
Risks that can occur:
The weather in 2019 is good, there is no possibility of bad weather in 2020. Therefore, the price reduction due to extreme weather in 2020 will be reduced.
On 4 December 2019, the Thai government approved a 20-year plan of the Thai rubber plantation area which will be reduced by 21% from 23.3 million rai (3.73 million ha) in 2016. The reduction is 18.4 million rai.
This policy change will have a short-term effect on the market but in the long run the effect will be small.
Rubber factory production from Vietnam increased, because Vietnam imported raw materials from neighboring countries such as Cambodia, Laos, Myanmar etc. Vietnam’s own domestic rubber production fell due to drought at the beginning of the middle of the year and new rain fell at the end of the second semester so that production fell.
Africa is increasing rubber production.
Conclusion of production:
From the ANRPC Report, the Rubber Producers Association until mid-2019, global natural rubber production fell 8.3% from last year to 5,853 million tons.
The decline in production occurred in Thailand down 15.7%, Indonesia down 12%, China down 17.1%, India down 4.1% and the Philippines down 1.3%.
From January to July natural rubber production amounted to 7,039 million tons, down 7.3% from 7,591 million tons in the same period in 2018. In total in 2019, a 5% decline from last year, a decline from the three countries of Thailand, Indonesia and Malaysia is estimated to decrease by 800,000 tons.
In 2019 it is estimated that production will shrink, thus making prices to rise in the first quarter of 2020 and prices will be in line with the decline in production.
However if the weather improves during 2020 the price will adjust, so that production will increase. As in 2017 production has increased because prices have risen this year, making enthusiastic wiretapping.
The demand for tires is part of the consumption of natural rubber in China. In 2018, tire consumption for trucks and buses requires 3.38 million tons of natural rubber, 59% of the total demand for rubber, tires for cars require 940,000 tons of natural rubber, 16% and latex production requires 460,000 tons, 8%. Rubber and other rubber products will use 940,000 tons of natural rubber, 17%.
Truck and bus tires are the highest, followed by cars. Latex is an industry that will increase in the future, although it hasn’t happened yet
In 2019 Chinese car consumption weakened, from January to October car sales by 20,639,297 decreased 10% from last year.
From January to October 2019, cumulative passenger car sales have reached 17,163,114 units to date.
Growth from commercial vehicles from January to October, during the negative 4 months, from May to August. Cumulative sales from January to October 3,476,183 fell 2.5% from last year, better than passenger vehicles and cars in general.
Heavy truck demand is leading, although growth is negative in the four months in January and April through July. Cumulative sales from January to October 980,138 vehicles increased 0.41% from last year.
The demand for cars is decreasing but the demand for heavy trucks is increasing, the demand for motorized vehicles such as cars is decreasing because of the large number of cars resulting in overload. However, to transport products from industries such as bicycles and other industrial products requires large vehicles, therefore the demand for heavy vehicles such as heavy trucks is increasing.
From 2009 – 2010 heavy truck sales increased monthly sales from 50,000 units to more than 60,000 units, even reaching 130,000 units in March 2011. From January 2008 – June 2011, total heavy truck sales were 2.74 million. Since 2009, where the usage period of heavy trucks is 8 years, now it is time to buy a new heavy truck. Therefore the demand for heavy trucks will increase again.
The use of heavy trucks is also to transport coal for power plants so that demand can rise again.
Chinese car demand is coming from developing countries, so the Chinese car industry is experiencing continued growth.
2. Development of the tire industry
In 2019 the tire industry is not good, production falls below, and exports are also small.
Growth from tire production in China has slowed, although the contribution of exports has increased, profits are still there. This is because the price of raw materials is stable. The profit margin is very small, 4.2%, because the market is quiet, even though factories and traders have increased, as a result, inventories have increased and capital from manufacturing is very large.
Chinese tire production had slowed down due to the development of an increasing tire factory and stalled capital, due to environmental influences and inefficient technological capabilities. Weakening demand from motor vehicles also makes tire demand reduced. According to The China Rubber Industry Association, tire demand for passenger cars in the first three quarters of 2019 fell by 19.7 million and for commercial car tires fell by 500,000.
In 2019, the development of public transportation vehicles will decrease by around 5%, and only 1.52% in October. Declining demand from public transport vehicles reduces tire demand.
Exports are important for tire demand, exports from tires have several important factors:
Until mid-2020, the rubber market will still be affected by weather, mushroom outbreaks, and several other factors in 2019. Prices will still increase by a few more points. The difference in 2020 rubber prices will improve. If there is an increase in prices will make production also increase, thus the rubber industry will be excited at the beginning of the year because rubber prices are rising at the end of 2019.
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