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- CRB Fundamentals - 2008 Commodity Articles

Rubber

Rubber is a natural or synthetic substance characterized by elasticity, water repellence, and electrical resistance. Pre-Columbian Native South Americans discovered many uses for rubber such as containers, balls, shoes, and waterproofing for fabrics such as coats and capes. The Spaniards tried to duplicate these products for many years but were unsuccessful. The first commercial application of rubber began in 1791 when Samuel Peal patented a method of waterproofing cloth by treating it with a solution of rubber and turpentine. In 1839, Charles Goodyear revolutionized the rubber industry with his discovery of a process called vulcanization, which involves combining rubber and sulfur and heating the mixture.

Natural rubber is obtained from latex, a milky white fluid, from the Hevea Brasiliensis tree. The latex is gathered by cutting a chevron shape through the bark of the rubber tree. The latex is collected in a small cup, with approximately 1 fluid ounce per cutting. The cuttings are usually done every other day until the cuttings reach the ground. The tree is then allowed to renew itself before a new tapping is started. The collected latex is strained, diluted with water, and treated with acid to bind the rubber particles together. The rubber is then pressed between rollers to consolidate the rubber into slabs or thin sheets and is air-dried or smoke-dried for shipment.

During World War II, natural rubber supplies from the Far East were cut off, and the rubber shortage accelerated the development of synthetic rubber in the U.S. Synthetic rubber is produced by chemical reactions, condensation or polymerization, of certain unsaturated hydrocarbons. Synthetic rubber is made of raw material derived from petroleum, coal, oil, natural gas, and acetylene and is almost identical to natural rubber in chemical and physical properties.

Natural rubber and Rubber Index futures are traded on the Osaka Mercantile Exchange (OME). The OME's natural rubber contract is based on the RSS3 ribbed smoked sheet No. 3. The OME's Rubber Index Futures Contract is based on a composite of 8 component grades from 6 rubber markets in the world. Rubber futures are also traded on the Shanghai Futures Exchange (SHFE) and the Tokyo Commodity Exchange (TOCOM).

Prices - The average monthly price for spot crude rubber (No.1 smoked sheets, ribbed, plantation rubber), basis in New York, in 2007 rose +7.0% to a record high of 112.24 cents per pound. A 3-decade low of 33.88 cents per pound was seen as recently as 2001 during that recessionary year.

Supply - World production of natural rubber in 2007 rose +2.1% to a record high of 9.893 million metric tons. The world's largest producers of natural rubber in 2007 were Thailand with 31% of world production, Indonesia (28%), Malaysia (12%), India (8%), Vietnam (6%), and China (6%).

In 2007 world production of synthetic rubber rose by +6.8% to a record high of 13.596 million metric tons. The world's largest producers of synthetic rubber in 2007 were the U.S. with 20% of world production, Japan (12%), Russia (9%), and Germany (7%). U.S. production of synthetic rubber in 2007 rose +4.0% to 2.708 million metric tons from the 14-year low of 2.064 million metric tons posted in 2001. U.S. production of car and truck tires in 2007 fell 6.8% to 186.000 million tires.

Demand - World consumption of natural rubber in 2007 rose by +5.6% to a record high of 9.735 million metric tons. The largest consumers of natural rubber in 2007 were the U.S. with 11% of consumption, Japan with 9%, Brazil with 3%, and France, Germany, and the UK with a combined 6.1%. The world's consumption of natural rubber has tripled since 1970. World consumption of synthetic rubber in 2007 rose by +6.7% to a record high of 13.197 million metric tons. The largest consumers of synthetic rubber in 2007 were the U.S. with 15% of consumption, Japan with 9%, and France, Germany, and the UK with a combined 9.1%. The world's consumption of synthetic rubber has more than doubled since 1970.

U.S. consumption of natural rubber in 2007 rose by +1.5% to 1.018 million metric tons. U.S. consumption of natural rubber has more than doubled since 1970. U.S. consumption of synthetic rubber in 2007 fell 3.0% to 1.941 million metric tons. The U.S. consumption of synthetic rubber is about the same as it was in the 1970s.

Trade - World exports of natural rubber in 2007 rose by +0.5% to a record 6.985 million metric tons. The world's largest exporters of natural rubber in 2007 were Thailand with 39% of world exports and Indonesia with 34% of world exports.

U.S. imports of natural rubber in 2007 rose +1.5% to a record high of 1.018 million metric tons. U.S. exports of synthetic rubber in 2007 rose +5.3% to a record high of 1.317 million metric tons.




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