ERASED FORESTS: rubber, biofuels and rural communities

PHNOM PENH: rubber demand is rising, Chinese, Cambodian and Korean companies are gaining plantation concessions in Cambodia. Yet, with land rights ill-defined, activists fear for local communities losing land, losing access to livelihoods, losing future benefit-sharing opportunities and becoming even more marginalised. With 60% of rubber for car tyres, and fast development in SE Asia, this is an issue that requires further analysis and attention. Will climate change help reduce this demand? will technology mean greater re-use and longer tyre lives? will fashion mean we change our cars for newer models more often?

Article from India's Zee News: Rubber demand surging with scarce supply

With buyers the world over scouring for natural rubber and producing countries struggling to increase supplies, industry will soon feel the bite of spiralling prices. Though the market has been very much in balance in 2007, demand could exceed supply as early as next year as several factors conspire to curb output growth in the main producing countries of Thailand, Indonesia and Malaysia. These include delays in planting caused by erratic weather, limits in cultivable land, labour supply constraints, higher wage costs and religious insurgency. "There is no single piece of evidence to foresee a decline in the price. All factors are favourable for an increase in price," said Jom Jacob, senior economist of the Association of Natural Rubber Producing Countries. "There are well-defined limits for natural rubber supply to increase at least until 2012. So, the tight supply situation is likely to continue," he said. International prices have risen four-fold since hitting 30-year lows in 2001, when there was a supply glut. Some analysts say they expect rubber to rise around 18 percent to $3 a kg next year. Thai RSS3 grade, often used as the benchmark for physical prices, stood at USD2.55 a kg on Friday. "It`s possible the price will reach $3, although I would prefer to refrain from mentioning any specific number. Strong demand, mainly from China, is one of the factors that will push up the price," said a Tokyo-based analyst. China boom The recovery in rubber prices and continued robust demand have taken place on the coat-tails of China`s booming economy. Tyres account for 60 % of the country`s rubber consumption, according to China Rubber Industry Association. As the world`s largest consumer, China last year imported 1.6 million tonnes of natural rubber, which is used in everything from tyres to sports shoes. China`s rubber consumption is to rise 12 % in 2007 from 2.1 million tonnes last year, according to the China Rubber Industry Association. China is emerging as a major exporter of cars and production of tyres has grown above 20 percent a year over the past few years. And last year, China outstripped Japan to become the world`s number-two auto market, with sales of 7.2 million vehicles and output of 7.3 million. "There`s a close relationship between economic growth and domestic consumption. From 2007 to 2010, I anticipate demand growth in China at between 7 and 10% each year for natural rubber," said Jacob of the ANPRC. Deficit looms "We expect global consumption to rise to 9.7 million tonnes in 2007, which is an increase of around 4%. Next year`s may reach around 10.1 million tonnes," said a London-based analyst. "Of course there`s global economic growth, and demand from the tyre industry is obviously the key factor. Also, within the increase in global demand, we`ve got the increase in GDP and the increase in mining activity that pushes up demand for tyres." With consumpution on the rise, supply will be a problem for the market. Synthetic rubber remains expensive as it is made from pricey crude oil. The International Rubber Study Group put global natural rubber output at 9.7 million tonnes in 2006 but output this year and next remains constrained. Output in Thailand, the world`s largest producer, may fall 1.5 % to about 3 million tonnes in 2007 from a year earlier because heavy rains have disrupted tapping. Production has also been hurt by separatist violence in Thailand`s southern provinces, which account for 10 percent of the country`s output. The second-largest producer, Indonesia, could see its output unchanged at 2.8 million tonnes next year, due to climate change and poor yields. Malaysia, the third-largest producer, may lose 250,000 hectares of plantations between 2008 and 2020 because of rapid industrialisation and expansion of its palm oil plantations as demand for biofuel drives prices to record highs. With emerging producers such as Vietnam, Cambodia and Laos, also struggling to boost output due to the lack of suitable land, rubber manufacturers will face higher costs. "Everybody cares about rising prices but there`s very little choice. There`s not much you can do very quickly to reduce your exposure to natural rubber consumption. I think we`ll have a deficit starting next year," said the London-based analyst. "Going forward, we`re looking at the deficit running to probably 2013. We don`t dare forecast the shortfall but fundamentals are driving the direction, while the extent of the movements in prices is probably driven more strongly by speculators." India, whose economy has grown at an average of 8.6% in the past four years, grows rubber but also imports the commodity from Southeast Asia to fill a supply gap. "A surge in the natural rubber price is inevitable with the widening of the demand and supply gap in the coming few years," said Arup Chandra, head of research and development at Apollo Tyres, one of India`s main tyre makers. India`s tyre industry has an annual turnover of USD4.5 billion and production of passenger cars is expected to grow 18 percent each year from 2006 to 2010.