WHAT TRIGGERED THE CRASH

Recession, crude oil prices and indiscriminate imports contribute to the price downturn

The immediate cause of this downturn was global economic recession. The transport sector alone accounts for about 70 per cent of the total rubber consumption in the world. With economic slowdown there is a corresponding decline in vehicles’ sales and, consequently, in demand for rubber.

“Along with this there was a fall in crude oil prices, weakening of the currencies of rubber-exporting Asian countries and speculation that Thailand would release half of the 220,000 tonnes of rubber it had procured at the start of the downswing,” points out Jom Jacob, deputy director (statistics and planning), Rubber Board, the only Central government agency entrusted with the responsibility of developing natural rubber. Thailand did release its stock, leading to excess supply in the market when consumption was low. This further depressed global prices.

Another major factor was China, a big rubber consumer, which was decreasing its imports. Between 2003 and 2011, China was focused on infrastructure development—a period that coincides with the boom in rubber prices. However, since 2011 China has reduced its imports of natural rubber and started investing on a large scale in natural rubber production to become self-sufficient.

Indiscriminate imports by domestic consumers made it worse. After economic reforms and trade liberalisation in 1991, the government relaxed restrictions on the import of natural rubber. Anybody can import rubber by paying the import duty of 20 per