Surging Rubber Prices Raising 'Alarm Bells'

Rising demand that has pushed prices for natural rubber to record highs is raising fears world supplies will run short, experts said April 20 at the World Rubber Summit held in Kuala Lampur, Malaysia. Growing demand has seen prices rise steadily for over a year, hitting $2 dollars per kilogram (2.2 pounds) as manufacturers baulk at the high cost of petroleum-based synthetic rubber which has risen in tandem with oil prices.

"There's a limit to what can be produced and demand is growing at a steady pace so people are afraid that there will be a shortage in the near future," said Hidde Smit, chief of the inter-governmental International Rubber Study Group Smit (IRSG) which comprises 17 nations and the EU.

Analysts have attributed current price levels to strong demand in developed economies, as well as from India and China where the auto sectors are rapidly expanding. Meanwhile natural rubber supplies have fallen due to adverse weather conditions in producing countries.

China has become the world's largest rubber consumer and importer since 2001, with domestic consumption hitting 2.04 million tons last year.

Darren Cooper of IRSG told delegates at the conference that the price of rubber in February had shot up 54% from a year earlier to $2,103 per ton in the New York market. With consumption already outstripping rubber production in 2005, Cooper projected a worldwide deficit of 820,000 tons by 2010. "If we don't do anything, if there is no substitution (for natural rubber) and no noticeable increases in production, there will be a deficit," he said.

Copyright Agence France-Presse, 2006

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