Outlook for the rubber industry International Smallholder Rubber Conference Phnom Penh, Cambodia 24 June 2009 Panel 4 : Prospects Prepared by the Secretariat of the International Rubber Study Group

Presentation content   The world economy, the IMF scenario   The vehicle sector   The tyre sector   Long-term aggregate rubber demand forecasts   Natural rubber supply potential   Natural and synthetic rubber demand   The effect of alternative economic growth scenarios

Economic developments   Economic activity is represented by Gross Domestic Product (GDP)   IRSG uses data from IMF   IRSG forecasts for 2009 to 2014 are taken from the IMF   IMF published data/forecasts in April 2009   Forecasts for later years are based on IRSG model

World GDP growth, July 2008 and April 2009: recession hits earlier

The vehicle sector

Passenger car production

Commercial vehicle production

Growth in vehicle production % growth Passenger cars Commercial vehicles

The tyre sector

Tyre sector Tyre sales is the sum of  original equipment (OE) tyre sales, determined by the number of vehicles produced  replacement (RP) tyre sales, determined by the number of vehicles on the road the number of vehicles on the road

Passenger car tyre sales, original equipment

Passenger car tyre sales, replacement

Passenger car tyre sales, total

Commercial vehicle tyre sales, original equipment

Commercial vehicle tyre sales, replacement

Commercial vehicle tyre sales, total

Growth in tyre production % growth Passenger car tyres Commercial vehicle tyres

Long-term aggregate rubber demand forecasts

Aggregate rubber demand  Aggregate rubber demand in the tyre sector; influencing factors are tyre production and rubber weight per tyre  Aggregate rubber demand in the general rubber goods sector; influencing factor is economic development

Rubber consumption 2018: tyres 16.5, GRG 11.2, total 27.7

World rubber consumption (‘000 tonnes) Total rubber volume% growth , , , , , , , ,6690.7

Modelling natural rubber supply potential

Natural rubber supply potential  About 85% of natural rubber is produced by smallholders  Production capacity suitable concept for synthetic rubber, but not for natural rubber

A general framework for natural rubber supply  The trend in production will be called normal production  Production exceeds normal production at high prices  And vice versa

The vintage approach derives and includes  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 18 April 2009

Projections up to 2018 depend on planting policies

Natural rubber production Thailand

Natural rubber production Indonesia

Natural rubber production Malaysia

Natural rubber production India

Natural rubber production Vietnam

Natural rubber production China

Natural rubber production Sri Lanka

Natural rubber production Cambodia

Global NR normal production to reach 13.0 million t. by 2018; actual production higher or lower depending on prices

Confronting supply potential and demand at 2008 market shares

The market  Forecasts for consumption of rubber (a lready presented)  Production potential of natural rubber (a lready presented)  How do these compare?

What are the determining factors driving the share of NR in total rubber consumption In broad terms: Technology: shares may depend on the country or the factory Technology: shares may depend on the country or the factory Composition of the end-uses: cv tyres use more NR than pc tyres Composition of the end-uses: cv tyres use more NR than pc tyres Price ratio of NR over SR Price ratio of NR over SR

Rubber prices and oil

Explaining developments in NR prices Analysis based on market equilibrium: supply and demand

Explaining developments in SR prices

Modelling prices of SBR using prices of styrene, butadiene and NR and GDP: a good fit

Projections of prices of oil are given below.

The price of oil to level off at around US$80/barrel and then decline

The IRSG makes and needs price forecasts for NR and SR in interaction with production and consumption forecasts. The IRSG is not allowed to publish these forecasts.

NR share in consumption

Rubber consumption 2018: NR 12.8, SR 14.9, total 27.7

World natural rubber consumption (‘000 tonnes) Consumption NR volume% growth 20069, , , , , , , ,8091.3

Consequences of alternative GDP scenarios   Base: GDP scenario as described above   Optimistic scenario: higher growth than in the base scenario   Pessimistic scenario: lower growth than in the base scenario

Growth in world GDP, alternative scenarios

NR consumption 2018: between 12.6 and 13.0 million tonnes

The role of the IRSG   The IRSG is the only public organisation providing appropriate forecasts for the rubber industry.   This is most important in the current uncertain situation.   The IRSG needs support and membership from all governments and industries involved in rubber and rubber products in order to be able to provide this service for optimal public and private planning.

Thank you!