By:

• Anthony Song, Director, APAC C4 Olefins & Elastomers, Chemical Market Analytics by OPIS

Introduction

Natural and synthetic rubbers are key components for tire production. There are also other components such as silica, carbon black, fiber, steel cord, and other chemicals. Global automotive production had started to recover from 2021 after substantial production decline due to COVID impact in 2020, but the growth rate was slow due to supply constraints caused by Russia-Ukraine war.

Supply constraints on auto-parts have relieved, but now auto makers are more concerned about demand constraints due to tariff on vehicle imports into US, continuing high inflation and interest rates. Natural rubber demand depends highly upon the automotive and tire industries. Natural rubber demand has been slowly recovering along with increasing vehicle production and demand recovery for replacement tires. However, the industry is also concerned with new headwinds from import tariff on vehicles by US, geopolitical risks, etc.

This focus will provide the latest overview of the natural rubber market.

Production

Global natural rubber production increased above 14 million tons from 2022 and reached 14.5 million tons in 2024.

Southeast Asia continued to remain as the key supplier of global natural rubber supply; however, some production decline was seen at traditional major producing countries like Thailand, Indonesia, and Malaysia.

Production in Malaysia continued to decline since 2019 and is producing less than 400 thousand tons per annum.

Production in Indonesia has sharply declined since the COVID because of few factors like low natural rubber price, reduced rubber processers, and tree disease etc. This is somewhat concerning because the rate of production decline in Indonesia is fast. Indonesia had produced more than 3 million tons between 2012 and 2019, but the production has declined more than 35% since 2019.

In Thailand, production had decreased due to harsh weather conditions during 1H of the year. Combined production from the top two producers, Thailand and Indonesia, had declined by 3% in 2024 when compared to previous year.

Unlike traditional producing countries, production from non-traditional countries have increased, especially in Cote d’Ivoire. Cote d’Ivoire has become the third largest producing country and is slightly behind Indonesia.

Other countries like Cambodia, Laos, and Myanmar have also increased the production. The combined production has surpassed 1 million tons since 2023. Sharp production increase from non-traditional producing countries has somewhat off-set the production loss from traditional producing countries. As result global production has increased about 3% in 2024 compared to previous year.

Although production is increasing from non-traditional producing countries, global production is expected to maintain marginal growth in coming years amid production losses from top two producing countries, especially from Indonesia.

Demand

Global light vehicle production recovered slowly after heavily impacted by COVID in 2020. Vehicle production had faced many challenges like supply constraints, geopolitical risks, Russia-Ukraine war since COVID.

Mainland China has been leader in global light vehicle production recovery amid strong growth in EVs and government support on it. The country already had surpassed the production level of 2017, which was the highest level pre-COVID, while global light vehicle production surpassed 2019 level. Key drivers of light vehicle production post-COVID were EVs, growing over 60% on average, and hybrids, growing over 30% on average. Vehicle manufacturers around the globe have been increasing the production of EVs and hybrids while reducing pure ICE (internal combustion engine).

Now vehicle production is facing new challenges from reciprocal and sectoral tariff announcements by US. While reciprocal tariff was targeted to balance the trade between US and the rest of the world, sectoral tariff targeted specific industries like steel and automotive. The outlook for light vehicles production had revised down by Oxford Economics. Global light vehicle production is expected to remain flat to last year due to headwinds from tariffs by US.

The tariff is expected to impact all those countries that exports vehicles to US. The top 5 vehicle exporting countries to US were Mexico, Japan, South Korea, Canada, and Germany. Those top 5 countries as well as other exporting countries will be impacted by the import tariff.

Natural rubber demand growth was about 2% in 2024, continuing to recover slowly after COVID period. Tire demand is divided into two segments which are OE (original equipment) and RE (replacement). OE tire demand has been growing following the vehicle production growth. However mileage driven by each vehicle had been affected by COVID restriction, which eventually led to weak replacement tire demand.

Tire inventory was built up and tire producers had to adjust production to lower inventory level in 2023, but production slowly increased in 2024 once the inventories were depleted. Global natural rubber demand was around 14.5 million tons, slightly below production, and most contributions were made from Asia.

Natural rubber demand from Europe has contracted, mainly due to Russia-Ukraine war which placed sanctions over Russian tire imports to other European countries and imports replaced by Asian tire exports. Natural rubber demand is expected to remain flat due to impact from the tariff on vehicles and auto-parts.

New tapping technology

In mainland China, Chinese Academy of Tropical Agricultural Sciences (CATAS) has introduced AI-powered rubber-tapping robot.

The robot, equipped with a multi-degree-of-freedom robotic arm and caterpillar-track mobility, leverages AI-driven technologies to adapt to complex terrain and perform precision cuts. It can adapt to varying tree bark depths and cutting angles, achieving 80% of manual harvesting efficiency while maintaining high latex quality. Powered by lithium batteries, the robot can harvest 100 to 120 trees per hour and operate continuously for over eight hours.

The cost of rubber tapping robot is estimated to be more than 100,000 yuan (around USD 14,000). The high cost of rubber tapping robot will not be suitable for small famers, but large plantations with labor shortage can utilize this robot for rubber production. Globally between 75 ~ 80% of natural rubber production is by small farmers.

The large plantations can adopt this robot to maintain consistent production yield and overcome labor shortage, but the cost has to further decline for small farmers to adopt this system for their rubber production.