There are problems in the future development of the international rubber industry

On May 26, the 18th Shanghai Derivatives Market Forum hosted by Shanghai Futures Exchange opened in Shanghai Futures Building. In the round table forum of Shangyan Rubber (11365, -50.00, -0.44%) Forum held in the afternoon of the same day, the guests had in-depth discussions on some issues facing the current international rubber market.

Although, this year, under the circumstance of strong supply and demand in both domestic and foreign markets, the market generally believes that the center of gravity of rubber prices is likely to remain high during the year. However, in the long run, there are certain problems in the supply of natural rubber at home and abroad, which need further attention.

According to Salvatore Pinizzotto, Secretary General of the International Rubber Research Group (IRSG), the main producing areas of natural rubber are currently concentrated in Southeast Asia, of which Thailand and Indonesia account for 56% of the world's total natural rubber production. However, Li Hong, general manager of Shanghai Shidong Trading, told reporters that due to the impact of the new crown epidemic in the past two years, Thailand's economy has continued to decline, and banks' loans to the rubber industry have been greatly reduced. In addition, with the recent outbreak of the new crown epidemic in Thailand, and the Thai government has also found Indian mutant strains in infected people, some areas have implemented strict regional closure policies. These will have a certain impact on the output of natural rubber in the past two years.

In addition, Li Hong believes that relevant companies need to pay more attention to the legalization policy of cannabis cultivation previously promulgated in Thailand. "Although this policy will not affect the local natural rubber output in the short term, considering that the cultivation of hemp will be more profitable, in the long run, it will definitely affect the local rubber planting."

In fact, in the past two years, Thailand's rubber production has declined due to the low return on rubber planting. Li Hong added that the production of natural rubber in Thailand in 2020 is only 4.5 million tons, compared with 5.14 million tons in 2018. The side proves the low return on investment in the rubber industry and the reluctance of new funds to enter the market to participate in planting or processing.

According to Wang Pei, chairman and general manager of Qingdao All-American Rubber Tire, the entire Southeast Asia is in such a situation. Especially in the past two years, under the trade friction, a large number of basic production enterprises have relocated to Southeast Asia, which has driven up land prices and workers' wages in Southeast Asia.

Under such circumstances, even though the relevant companies have raised the wages and prices of rubber tapping and planting personnel in the past two years, the enthusiasm of the workers is not high. According to Salvatore Pinizzotto, not only has new investment in plantations continued to shrink, but also fewer young people and women are participating in the seed rubber industry.

Although the production in Africa and Latin America has been growing continuously in the past two years, Wang Pei believes that the growth of new production areas cannot offset the decline in production in the main production areas, which will eventually affect the future market supply and demand.

As for the country, it seems to be the same situation. Li Qisheng, president of Hainan Natural Rubber Industry Group, said when introducing the current situation of Hainan's rubber market, Hainan currently cannot find a large-scale seedling company, and private enterprises have not grown new rubber in the past two years.