Indonesian earthquake creates NR uncertainty

ERJ staff report (R&PN)

Padang, Indonesia -- A catastrophic earthquake in Sumatra, the largest island and main rubber-growing part of Indonesia, has created fears in the rubber industry that natural rubber supplies could grow short, particularly in Standard Indonesian Rubber 20, the grade most commonly used by US tyre makers.

A 7.6-magnitude earthquake Sept. 30, followed by a powerful aftershock the next day, destroyed the town of Padang, a major NR port, and several surrounding towns and villages. The death toll stood at 531 as of Oct. 1 and was expected to go higher, as thousands of people remained buried under the rubber in Padang. Padang port has since re-opened, though supplies are still severely disrupted.

Some 50,000 metric tons of NR scheduled for October and November shipment will be delayed at least one or two weeks because of impassable roads between plantations and ports, according to news reports.

The situation in Sumatra probably will remain unclear until next week, but any supply disruption would come at the worst possible time, according to a source who asked to remain anonymous.

“The worldwide 'Cash-for-Clunkers' programme caught many tyre makers by surprise,” the source said. “For the past six to eight weeks, there's been a lot of demand for nearby shipments of SIR 20, so the market is tight already.”

The supply problem most likely will be localised in the US, the source said. Padang is the leading “break-bulk” port, meaning it ships rubber in crates rather than containers. US tyre makers accept break-bulk shipments, but European tyre makers do not.

SIR 20 fetched a price of $1.05 per pound ex-dock (at the port of origin) Oct. 1, up from $1.02 Sept. 25.

From Rubber & Plastics News (A Crain publication)