EconomyNext – Rubber prices are likely to remain low despite expectations of a recovery this year given slow global demand in and surplus stocks with the collapse in crude oil prices, according to Sri Lanka’s biggest producer.
Kegalle Plantations said its rubber production fell 12 percent to 3,534 metric tons in 2014 from the year before and that it accounts for about four percent of the island’s production.
The company’s chairman Sena Yaddehige said this year is expected to be a “challenging” year with forecasts that tea prices will further decline and rubber prices will continue to remain weak due to the “sluggish demand” in the world market.
“We are anticipating a surplus rubber stock with the reduced oil prices,” he has told shareholders in the company’s annual report.
Producers are under pressure owing to lower global demand for natural rubber accompanied by economic downturn and large stockpiles accumulated in major buying countries like China, Japan and Europe.
Lower oil prices have also encouraged a shift to synthetic rubber use, Kegalle Plantations said.
“The declining trend in the global rubber market is expected to be continued to the next period due to large stockpiles accumulated in major buying countries although their expectations were to recover within 2015,” it said.
“Weakening crude oil prices prompted the demand for synthetic rubber placing further downward pressure on natural rubber prices.”