As international crude prices surge due to the fallout from the war between the United States and Iran, driving up prices of petroleum-based synthetic rubber, global companies have moved to secure natural rubber as a substitute.
According to Nikkei Asia on the 10th, as oil prices have soared since the Middle East war and prices of synthetic rubber, which is petrochemical-based, have risen in tandem, the industry is increasing the share of natural rubber use.
The futures price of TSR20-grade natural rubber transaction on the Singapore Exchange (SGX) reached $2.22 per kg on the 7th. It is the record high since Feb. 2017. Natural rubber prices have risen more than 20% so far this year.
Natural rubber is made by processing latex, a milky white liquid collected from rubber trees. Thanks to its high strength and elasticity, it is essential for producing products such as automobile tires and gloves.
Virasit Sincharoenkul, CEO of Sri Trang Agro-Industry, Thailand's largest rubber producer, said, "As synthetic rubber prices rise, some corporations are cutting back on petroleum-based materials," adding, "Because natural rubber can partly replace synthetic rubber in products such as tires and gloves, its price is rising as well."
Aggressive efforts by corporations to secure inventories to hedge against instability in raw material supply also fueled the price increase. CEO Virasit explained, "Typically, buyers hold one to two months of inventory, but some companies are now increasing that to three months."
The industry also sees a possibility that the current price rise may not be limited to a wartime windfall. In particular, as the electric vehicle market grows, demand for high-quality natural rubber has already been steadily increasing. Because electric vehicles carry batteries, they are about 300 kg heavier than internal combustion models of the same class, and their instant acceleration wears out tires quickly. As a result, the share of high-quality natural rubber that can withstand EV performance is growing.
China is currently the world's largest consumer of natural rubber and producer of automobile tires. According to research by Krungsri Bank in Thailand, China accounted for about 45% of global natural rubber demand last year. Global tire companies are expanding local production in China, and Chinese companies are also rapidly increasing capacity in step with the growth of the EV market.
Chaiwat Sowcharoensuk, a rubber industry analyst at Krungsri Bank, said, "As long as global energy prices stay elevated, the shift by corporations to natural rubber is likely to continue," adding, "The market is also changing from a volume-centric to a quality-centric structure."
The cost burden is likely to eventually lead to higher consumer prices. An executive at a Japanese tire company operating production facilities in Thailand told Nikkei Asia, "We are closely watching rising rubber prices and higher shipping costs due to the Middle East crisis," adding, "We may ultimately have to pass the expense increases on to consumers."