Thai rubber manufacturer are marching into 2017 along with three major developments : 1) rubber prices bottomed out last year, with the price of Ribbed Smoked Rubber Sheets (RSS3) rising along with crude oil prices 2) rubber suppliers in the CLMV countries have stepped up their roles in diminishing Thai suppliers’ dominance 3) increased bargaining power against tire companies after Sinochem\’s acquisition of several rubber companies which concentrated the market into the hands of a few large players.
EIC sees an opportunity for the Thai rubber industry to refocus towards value-added rubber products such as rubber gloves. Both the private and public sectors should collaborate on R&D for new products. There are also opportunities to partner with Malaysian companies interested in investing in the rubber glove industry.
The rubber industry struggled with falling rubber prices during 2014 – 2016. This year, the industry took a positive turn along with 3 significant developments. First, rubber prices are projected to rise in 2017 along with the recovery of crude oil prices and reduced supply from floods in the Southern provinces, putting an end to the downward trend in rubber prices. The price of RSS3 remained low during 2014 – 2016, with an average price of 55-57 THB/kg. In 2017, the average price regained its upward trend to move above 60 THB/kg. The main contributing factor is a rebound in global crude oil prices, which recovered to a level of 50-55 USD/barrel from as low as 37 USD/barrel in early 2016 (Figure 1). The rise in crude oil prices has been driven by an OPEC production cut and the recovery of the global economy, especially the U.S. Additionally, floods in the Southern provinces of Thailand in late December 2016 to January 2017 restrained rubber supplies. EIC sees the Thai rubber output in 2017 reaching 4.3 million tons, a 3% drop from the previous year. Lower Thai output, combined with a decline in global rubber production over the past two years due to unsuitable climate conditions, translates to a 7.1% drop in global rubber stocks this year at 2.6 million tons (Figure 2). These two factors contribute to higher prices, signaling an end to the downward trend. EIC projects an average rubber price for 2017 of 72.5-77.5 THB/kg, with the price gradually declining in the second half of the year after rubber trees have shed leaves and Thai rubber production returns to normal.