Rubber prices, which have hit 20-year highs this summer, will continue to rise through 2006 and into 2007, according to analysts speaking at the 2006 Management Briefing Seminars in Traverse City.
According to Kona Haque, chief commodities analyst at the Economist Intelligence Unit, the average price for RSS1, the most common type of natural rubber used in tires, hit $2,500 a metric ton-about $1.13 a pound-on July 20, up from $2,380 in the second quarter and $1,864 in the fourth quarter of 2005.
Chinese demand was much higher than expected, according to Whitney Luckett, vice president of sales and marketing with RCMA Americas Inc. She said she expects prices to consolidate and rise slightly by year-end.
Ms. Luckett predicts year-end prices for natural rubber won't be near what they were Jan. 1. Higher prices are a consequence of the demand in China, along with a limited supply of the tree-grown commodity.
But rubber can be highly influenced by anything from rains in Asia to air quality, she added.
Ms. Haque predicts natural rubber prices will continue their climb through 2006 and 2007, rising to perhaps as high as $2,700 a ton by year-end and staying high through 2008 before demand begins slowing and production increases.
Industrial consumers must learn to live with high rubber prices, she said.
Prices for synthetic rubber are rising as well, Ms. Haque said, because of high prices for petroleum, the main raw material used in synthetic rubber. Oil-derived feedstocks and energy prices could have a dire effect on man-made rubber.
The price spikes have left tire companies scrambling. While some manufacturers have tried substituting synthetic rubber in their tires, others have been pushed to cut production or close plants.
More than 60 percent of the rubber industry is devoted to tires, and an additional 10 to 15 percent is related to other automotive parts, said Hidde P. Smit, secretary-general of the International Rubber Study Group. Booming Chinese automotive and industrial markets have caused a surge in demand, pushing up the price of natural and synthetic rubber.
Rubber materials make up 41 percent of vehicle tires. Fourteen percent of that is natural rubber and 27 percent synthetic rubber, according to the Rubber Manufacturers Association. Large truck tires have a larger percentage of natural rubber.