EIU predicts 5% annual growth to 2007 for NR following China's tyre boom

By Liz White, ERJ staff

London-The Economist Intelligence Unit has revised its forecasts for global natural rubber demand upwards. China's current prospects of "sustained high level of demand for natural rubber have strengthened," the EIU said and "we now expect growth in global consumption to accelerate slightly from 4 percent in 2004 to over 5 percent in both 2005 and 2006, before slackening slightly in 2007."

In China, the EIU says, the boom in tyre production has continued to boost NR consumption, with the result that first-quarter usage in 2005 was almost 19 percent higher than in 2004.

It now expects China's demand growth in 2005 to be at least 12 percent, and feels this will be sustained in 2006 before slowing in 2007.

Elsewhere in Asia, demand has been reviving, the EIU said, with use in Japan up 4 percent year on year in 2004, and demand equally strong in India. In Asia as a whole, the report said, NR use increased an estimated 5.5 percent in 2004.

By the end of 2007, Asia's share of global NR consumption "will exceed a massive three-fifths," the EIU emphasised.

In contrast, the US tyre industry is struggling, as evidenced by the recent announcement of factory closures. "Import penetration of the US tyre market has been rising strongly, doubling over the past five years," the EIU says.

Hence, US demand for NR is faltering, and growth in North use in 2005 will be "well below the 5.4 percent recorded in 2004," said the EIU, predicting growth of less than 2.5 percent in 2005 and of a further deceleration in 2006.

Use of NR in the expanded European Union-coined EU25 by the EIU-was 15 percent of global usage in 2004, but in 2004, usage of "actually fell … by almost 5 percent," the report comments.

In sharp contrast is the increase in demand in the rest of Europe (mainly the former Soviet bloc)-a much smaller market, but one where NR use rose almost 9 percent last year. First-quarter consumption this year grew dramtically, by 24 percent over Q1 2004, "justifying a rise in our expectations of demand over the forecast period," said the forecasters.

Latin America represents a smaller market for natural rubber than America, Asia or Europe, but it has been experiencing an upsurge in demand, led by Brazil, where industrial growth is still healthy. Consumption in 2004 rose by almost 11 percent, and we expect this to be followed by annual growth in excess of 7 percent

The EIU's world commodities report for October 2005 contains more detail and breakdowns of consumption and production of NR worldwide, with forecasts.