International Rubber Study Group

Trends and Challenges in the Global Rubber Supply and Demand: An Overview
Asian Commodities & Derivatives Conference Jakarta, Indonesia 23 May 2011 Prepared by the IRSG Secretariat
www.rubberstudy.com

Themes

Economic Recovery Global Rubber Demand Forecast Natural Rubber Supply Potential Global Trade Flows Global Rubber Balance Potential Challenges

Data Sources
World economy as defined by GDP is provided by the IMF. Beyond 2015, IRSG uses its own model projections Vehicle and Tyre sector data supported by LMC Oil price forecast as defined by EIA Feedstock and Synthetic Rubber sector data supported by CMAI & IISRP Rubber demand forecast as defined by IRSG Natural Rubber supply potential as defined by IRSG Natural and Synthetic Rubber demand as defined IRSG

Global GDP Growth (IMF sourced, %)

6 5 4 3 2 1 0 -1 1990 1995 2000 2005 2010 2015 2020

Global Rubber Consumption by Type to 2020,

(Millions of MT)
40 35 30 25 20 15 10 5 0 1990 1995 2000 2005 2010 2015 2020

Natural Rubber 15.4

Synthetic Rubber 18.5

Total 33.9

World Rubber Consumption, (Millions MT)

Consumption Total Rubber Volume Million MT 2008 2009 2010 2011 2012 2015 2018 2020 22.8 21.1 24.3 25.8 27.3 30.4 32.5 33.9 Annual Growth % -2.5 -7.5 15.3 6.3 5.5 3.6 0.2 3.3

Rubber Consumption 2020, (Millions of MT)

40 35 30 25 20 15 10 5 0 1990 1995 2000 2005 2010 2015 2020

Tyres 21.4

General Rubber Goods 12.5

Total 33.9

Tyre Rubber Consumption by Type to 2020,

(Millions of MT)
25 20 15 10 5 0 2005 2010 2015 2020

Natural Rubber 11.4

Synthetic Rubber 9.9

Total 21.4

Natural Rubber Consumption 2020

(Millions of MT)

Tyres 11.4

General Rubber Goods 3.9

Total 15.4

Global Natural Rubber Consumption,

(Millions of MT)
Consumption Natural Rubber Volume MT 2008 2009 2010 2011 2012 2015 2018 2020 10.2 9.3 10.7 11.2 11.6 13.1 14.4 15.4 Annual Growth % 0 -9.1 15 4.6 3.9 4.3 1.5 4.1

Synthetic Rubber Consumption 2020

(Millions of MT)
20 18 16 14 12 10 8 6 4 2 0 2005 Tyres 9.9 2010 2015 General Rubber Goods 8.6 2020

Total 18.5

Global Synthetic Rubber Consumption,

(Millions of MT)
Consumption Synthetic Rubber Volume MT 2008 2009 2010 2011 2012 2015 2018 2020 12.6 11.8 13.6 14.7 15.7 17.3 18.1 18.5 Annual Growth % -4.7 -6.3 15.6 7.6 6.7 3 -0.8 2.7

General Framework for NR Supply

The trend in production will be called normal production. Production exceeds normal production at times of high prices and vice versa. Normal production is derived using the vintage approach. The composition of the total area for natural rubber according to the year of planting (the vintages). The average yield profile for a hectare of rubber during its life. Technical progress in quality of clones affecting yield profiles of hectares planted in various years.

Natural Rubber Supply to 2020

Projections of supply potential depend on existing area composition and future planting policies. The Normal Production concept is analogous to Nameplate Capacity and has no reference to price.

Global Natural Rubber Normal Production, (KT)

15000 12500 10000 7500 5000 2500 0 1990 1995 2000 2005 2010 2015 2020

Thailand Age Distribution of Area (KHa)

2500

2000

1500

1000

500

0 1975 1980 1985

<0-6>

1990
<7-13>

1995
<14-20>

2000
<21-27>

2005

2010

2015
<35 +>

2020

<28-34>

Thailand Natural Rubber Production

4000 3500 3000 2500 2000 1500 1000 500 0 1990 1995 2000 2005 2010

(KT)

2015

2020

Indonesia Smallholding Age Distribution of Area (KHa)

3500 3000 2500 2000 1500 1000 500 0 1975 1980 1985
<0-6>

1990
<7-13>

1995
<14-20>

2000
<21-27>

2005
<28-34>

2010

2015
<35 +>

2020

Indonesia Estate Age Distribution by Area (KHa)

450 400 350 300 250 200 150 100 50 0 1975 1980 1985 1990
<7-13>

1995
<14-20>

2000
<21-27>

2005

2010

2015
<35 +>

2020

<0-6>

<28-34>

Indonesia Natural Rubber Production

3000 2500 2000 1500 1000 500 0 1990 1995 2000 2005 2010 2015

(KT)

2020

Malaysia Smallholding Age Distribution of Area (KHa)

1600 1400 1200 1000 800 600 400 200 0 1975 1980 1985
<35 +>

1990
<28-34>

1995
<21-27>

2000

2005

2010
<7-13>

2015
<0-6>

2020

<14-20>

Malaysia Estate Age Distribution by Area (KHa)

600 500 400 300 200 100 0 1975 1980 1985 1990
<28-34>

1995
<21-27>

2000

2005

2010
<7-13>

2015
<0-6>

2020

<35 +>

<14-20>

Malaysia Natural Rubber Production

1600 1400 1200 1000 800 600 400 200 0 1990 1995 2000 2005 2010 2015

(KT)

2020

Vietnam Age Distribution of Area (KHa)

900 800 700 600 500 400 300 200 100 0 1975 1980 1985 1990 <28-34> 1995 <21-27> 2000 <14-20> 2005 <7-13> 2010 <0-6> 2015 2020

<35 +>

Vietnam Natural Rubber Production

1400 1200 1000 800 600 400 200 0 1990 1995 2000 2005 2010

(KT)

2015

2020

India Age Distribution of Area (KHa)

900 800 700 600 500 400 300 200 100 0 1975 1980 1985
<0-6>

1990
<7-13>

1995
<14-20>

2000
<21-27>

2005
<28-34>

2010

2015

2020

<35 +>

India Natural Rubber Production

(KT)

Cambodia, Lao and Myanmar-Natural Rubber Production (KT)

Synthetic Rubber Supply to 2020

IRSG has historically assumed that monomer feedstocks and manufacturing capacity is available on an unlimited basis, going forward. Based on recent market experience, with petrochemical cracker diets going lighter, butadiene supply being constrained, plus its price becoming uncoupled from traditional crude oil price drivers, this above narrow view must now be challenged and built into future scenarios for modeling activities.

Butadiene Demand 2014, (KT)

9000 8000 7000 6000 5000 4000 3000 2000 1000 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 ABS Adiponitrile Synthetic Rubber Others

Olefin Cracker Yields, (MT for MT of Feedstock)

1.00 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 Ethane Propane Butane Naphtha Gas Oil Bitumen Gas oil Gasoline Fuel gas Butadiene Butylene Propylene Ethylene

Butadiene Supply 2014, (KT)

16000 14000 12000 10000 8000 6000 4000 2000 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 BD Capacity BD Production BD Demand C4 Supply

Crude Oil Price to 2020 (EIA sourced in USD per barrel)

210

160

110

60

10 1990 1995 2000 2005 2010 2015 2020

Natural Rubber Exports-Major Producers

Natural Rubber Imports-Major Consumers

Synthetic Rubber Exports-Major Consumers

Synthetic Rubber Imports-Major Consumers

Potential Challenges
Positive externalities

Surge in planting area in line with 2005-08 period Production shift from traditional to non-traditional region and its likely influence on productivity and immaturity period Climate change Labour shortage Alternative Crops and land use Strategic drive within major NR producing countries to develop local downstream consuming industries, in potential conflict with the urge of China and India to consume more

Negative externalities

Upstream vs. downstream

Global Natural Rubber Scenarios (KT)

Global Natural Rubber Balance(Millions of MT)

Consumption 2000 2005 2008 2009 2010 2011 2012 2015 2018 2020 7.4 9.2 10.2 9.3 10.7 11.2 11.6 13.1 14.4 15.4

Normal production 7.6 8.5 8.9 9.0 9.2 9.5 9.9 11.6 13.0 13.8

NP/Consumption ratio 1.02 0.93 0.88 0.97 0.87 0.85 0.86 0.88 0.90 0.89

Theoretical Global Synthetic Rubber Scenarios

(KT)
20000 18000 16000 14000 12000 10000 8000 6000 2005 2007 2009 2011 2013 2015 2017 2019 ActualProduction Demand Nameplate Capacity

Price Trends (USD per MT)

4000 3500 3000 2500 NR 2000 1500 1000 500 0 1990 1995 2000 2005 2010 BR BD Crude

Conclusions

Supply of Natural Rubber (based on Normal Production) over the planning period is at the best balanced versus premised demand, assuming high prices stimulate over tapping. Current high market prices for Natural Rubber may stimulate a further surge in new planting area as last seen in the 2005-08 period, which is not fully reflected in current supply forecasts. It is vital to understand the global Oil Natural Gas position and their impact on Butadiene and Synthetic Rubber availability and price going forward.

International Rubber Study Group

Thank You for Your Attention