Rubber market: Covid impact ‘to mirror that of financial crisis’

Singapore – The impact of the Covid-19 crisis on the global rubber market will be broadly similar to that seen during the financial crisis 2008-2009, independent consultant Dr Hidde Smit, has forecast.

In an analysis posted 25 June on the International Rubber Study Group (IRSG) website, Smit noted that back in Q4 2008 and Q1 2009, total rubber consumption dropped 15.8% and 12.2% respectively – as financial uncertainty hit demand for vehicles and tires. 

This was followed by a rebound in rubber consumption, with increases of 20% and 12.4% respectively in the second and third quarters, and demand restored to pre-crisis levels by early 2010. 

Natural rubber (NR) consumption followed a similar track: declines of 8.5% and 17.6% for Q4 2008 and Q1 2009 being followed by increases of 10.0% and 10.3% in next two quarters. 

Amid the current Covid-19 crisis, Smit expects to see a repeat of this general pattern: starting with declines of 11.9% and 13.6% in overall consumption in the first two quarters of this year.

In volume terms, this equates to a drop in consumption, from 7.1 million tonnes in the final quarter of 2019 to 5.4 million tonnes in Q2 2020. 

This negative trend, forecasts Smit, will be followed by a 25.4% rebound in consumption in Q3 2020 to reach 6.8 million tonnes. 

Nevertheless, this year will see declines of 11.2% in total rubber consumption and 10.6% in NR consumption, Smit’s analysis shows.

The analysis also shows a sharp drop in global NR production in the first quarter of this year, reflecting declines in both consumption and prices. Again, though, Smit forecasts a general pattern of recovery to 2022.