1. 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

2. 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

3. 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

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

5. The vehicle sector

6. Passenger car production

7. Commercial vehicle production

8. Growth in vehicle production % growth Passenger cars Commercial vehicles 20066.3 0.4 20075.8 4.5 2008-1.3-6.6 2009-22.4-20.1 20103.6 7.6 201122.312.8 201514.310.7 2018-3.4-5.8

9. The tyre sector

10. 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

11. Passenger car tyre sales, original equipment

12. Passenger car tyre sales, replacement

13. Passenger car tyre sales, total

14. Commercial vehicle tyre sales, original equipment

15. Commercial vehicle tyre sales, replacement

16. Commercial vehicle tyre sales, total

17. Growth in tyre production % growth Passenger car tyres Commercial vehicle tyres 20060.8 3.7 20075.9 5.6 2008-0.40.2 2009-6.4-3.8 2010-3.44.5 20114.55.4 20158.77.6 20180.40.8

18. Long-term aggregate rubber demand forecasts

19. 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

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

21. World rubber consumption (‘000 tonnes) Total rubber volume% growth 200621,810 4.0 200723,045 5.7 200822,299-3.2 200920,817-6.6 201021,3922.8 201122,5025.2 201527,1186.1 201827,6690.7

22. Modelling natural rubber supply potential

23. 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

24. 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

25. 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

26. Projections up to 2018 depend on planting policies

27. Natural rubber production Thailand

28. Natural rubber production Indonesia

29. Natural rubber production Malaysia

30. Natural rubber production India

31. Natural rubber production Vietnam

32. Natural rubber production China

33. Natural rubber production Sri Lanka

34. Natural rubber production Cambodia

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

36. Confronting supply potential and demand at 2008 market shares

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

38. 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

39. Rubber prices and oil

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

41. Explaining developments in SR prices

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

43. Projections of prices of oil are given below.

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

45. 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.

46. NR share in consumption

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

48. World natural rubber consumption (‘000 tonnes) Consumption NR volume% growth 20069,243 1.8 20079,884 6.9 20089,726-1.6 20099,232-5.1 20109,7035.1 201110,2635.8 201512,3136.1 201812,8091.3

49. 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

50. Growth in world GDP, alternative scenarios

51. NR consumption 2018: between 12.6 and 13.0 million tonnes

52. 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.

53. Thank you!