Natural Rubber Industry in the Global Context

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Natural Rubber Industry in the Global Context

India is the third largest rubber producer behind Thailand and Indonesia, respectively. Each year, Indian rubber tappers cut slits in the trunks of millions of Hevea brasiliensis trees and collect the white slippery liquid in their pails. Once it has dried, the concentrated latex is sold in sheet form to create anything from car tires to condoms, Band-Aids to tar.

The south Indian state of Kerala contributes 90 per cent of India’s total production, 755,000 tons whereas India as a whole produces 825,000 tons annually. Kerala and Tamil Nadu share 86 per cent of the growing area of natural rubber. The rubber producing business is a prosperous sector in Kerala’s economy but it also suffers from instability.

After the opening up of the Indian economy in 1990s, India’s domestic rubber market started showing links to the international market. The rubber industry is very sensitive which can be dangerous for tappers and rubber estate owners alike as the price of rubber is constantly changing and any economic decline or rise affects the rubber industry to a large extent.  Rubber prices are inherently tied to oil prices as both feed into the transportation industry. Indian rubber prices sharply declined in October 2008, due to fall in crude oil prices.

However, India’s natural rubber production has been increasing steadily over the past decade, growing at approximately 6 per cent and bringing in around 6-7 lakh tons annually which amounts to Rupees 3000 crores. 52 per cent of the total natural rubber produced in India is consumed by the tire industry, which is a prospering market, especially in China, the leading export market for India.

China provides the Indian rubber industry with a three-sided structure of selling security. China is not only the fastest growing economy in the world and the largest consumer of natural rubber, but also the largest automobile manufacturer in the world. In 2009 China produced 13.79 million automobiles, creating huge demand for rubber for tires and tar roads. It is estimated that the Chinese car market will grow tenfold between 2005 and 2030. As the Chinese economy grows, the Indian rubber industry finds economic safety in meeting in northern neighbor’s demand levels.

Between current spikes in global oil prices and ever-expanding automobile and transportation sectors, rubber prices are experiencing a relatively stable growth rate, allowing the Asian Tiger to rest easy for the time being.

Paige Veidenheimer