EVs, China growth to drive global rubber demand in 2023

Singapore – The global demand for natural and synthetic rubbers is set to grow by over 2% year-on-year in 2023, according to a recent report by the International Rubber Study Group (IRSG).

The growth will follow a marginal contraction in demand in 2022 to 29.82 million tonnes for the overall consumption of both natural and synthetic rubbers, said IRSG in its latest issue of World Rubber Industry Outlook (WRIO).

“With the ease of supply chain issues and supply chain restructuring, global rubber demand is forecast to recover modestly to 2.2% in 2023,” said the report.

According to IRSG, the global NR demand increased by 1.7% in 2022, reaching 14.31 million tonnes.

Driven by the tire sector growth in China, Asia Pacific and Americas, the report predicted that demand for NR will increase 1.7% during this year.

Risk factors, however, will include the uncertain economic environment and the rising inflation and fuel prices which have led to a drop in passenger car tire production, and rubber demand.

According to IRSG, SR consumption declined by 1.6% in 2022, primarily driven by a reduction in rubber usage in the tire sector.

For this year, however, the organisation expects SR consumption to increase by 2.6% year-on-year.

Despite slowing growth in the gloves sector, robust increases in electric vehicles in mature and emerging markets and growing Chinese passenger tire exports are expected to drive SR consumption this year.

In terms of production, global NR output increased by 4.8% reaching 14.47 million tonnes in 2022.

The growth was supported by production in Côte d'Ivoire and Thailand, and the increase in mature rubber areas in Cambodia, Myanmar, and Laos.

NR production growth is, however, estimated to slow down to 0.7% in 2023, primarily driven by a substantial reduction in Indonesian production.

According to IRSG, Indonesia, the second largest producer, has suffered from poor yield due to the spread of the Pestalotiopsis fungal leaf disease.

Furthermore, lack of financial incentives for replanting also compelled Indonesian small farmers to abstain from harvesting; leading to them 'just retain' old trees or shift to other crops given the low rubber prices.

Over the medium term, the increasing share of the untapped mature areas, low rubber prices, disease spread, and a lower rate of NR replanting will likely lead to further drop in production.

The expected expansion of NR output from countries like Côte d'Ivoire, as well as from the Mekong countries and India, IRGS went on to say, may not offset “the substantial reduction" in production forecasted for Indonesia and other Southeast Asian producers.

This will likely lead to an insufficient rubber supply situation in the medium to longer-term, the report concluded.