WHAT TRIG­GERED THE CRASH

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

Down to Earth - - COVER STORY -

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

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