by Yium Tavarolit Chief Secretary and Economist International Rubber Consortium Limited (IRCo)

Regional Demand Analysis & Outlooks:China, India & ASEAN Consumption & Usage ForecastsPresented at Thai Rubber Conference 2007 by Yium Tavarolit Chief Secretary and Economist International Rubber Consortium Limited (IRCo) Venue Royal Orchid Sheraton Hotel, Bangkok 5 July 2007

I. Asia-Pacific Rubber Consumption Analysis Table 1. Global rubber production and annual % change by year (1995–2006) Source: IRSG

Figure 1. Global rubber production by year(1995–2006) Source: IRSG

Table 2. Global rubber consumption and annual % change by year (1995–2006) Source: IRSG

Figure 2. Global rubber consumption by year (1995–2006) Source: IRSG

Table 3. NR, SR, Total rubber stocks and annual % change by year (1995–2006) Source: IRSG

Figure 3. NR, SR, Total rubber stocks by year (1995–2006) Source: IRSG

Table 4. China rubber consumption and annual % change by year (1995–2006) Source: IRSG

Figure 4. China rubber consumption by year (1995–2006) Source: IRSG

Table 5. India rubber consumption and annual % change by year (1995–2006) Source: IRSG

Figure 5. India rubber consumption by year (1995–2006) Source: IRSG

Table 6. Japan rubber consumption and annual % change by year (1995–2006) Source: IRSG

Figure 6. Japan rubber consumption by year (1995–2006) Source: IRSG

Table 7. Asian rubber consumption and annual % change by year (1995–2006) Source: IRSG

Figure 7. Asian rubber consumption by year (1995–2006) Source: IRSG

Figure 8. Trends in demand for tires (2005–2020) Source: IRSG, IRCo

II. Demand Projection and Forecast (from 2007 to 2035) Table 9. Consumption of NR & SR(1995–2006)and forecast (2010-2035) Source: LMC

Figure 9. Consumption of NR & SR(1995–2006)and Forecast (2010-2035) Source: LMC

III. Regional Rubber Prices Movements and Concerns Movement Table 10. RSS3 price on TOCOM and physical average price Note: *[4] from average NR price of SIR20, SMR20, STR20 and RSS3 Source: IRCo

Figure 10. RSS3 price on TOCOM and physical average price Source: IRCo

1995: Tight regional supply due to heavy rainfall and floods and high overseas demand • 1996: Increased supply and surplus in China, high unemployment in Europe, and slack automobile market and troubled tire industry • 1997: Cheaper Indonesian natural rubber, 13,000 workers struck at Goodyear Tire and Asian economic crisis in the mid - year • 1998: Increased supply, economic slowdown in Asia, weak Ringgit, INRO Council agreed to dispose 55,000 tons per quarter • 1999: INRO liquidated its stocks, soft demand, aggressive offers of exporters • 2000: (Unusual phenomenon) oil price climbed to US$37.15, highest Nymex record in the last 10 years, heavy floods in the South of Thailand and Peninsular Malaysia, output down by 30-50% • 2001: Continuous rain reduced supplies by 30-40%, INRO completely liquidated all its stocks, and signing of Bali Declaration by Thailand, Indonesia and Malaysia to cut back production by 4% and exports by 10% beginning 2002 Source: IRCo

2002: Tight supply, the news of delayed shipments, strengthening of Rupiah, Thai Baht, low rubber stocks at Japanese warehouses, and establishment of International Rubber Consortium Limited( IRCo) • 2003: Tight supply due to rain, low Chinese and Japanese stocks, and unfavorable weather caused raw material shortage, strong buying interest from China and tire-makers and futures markets • 2004: Shortage of supplies during wintering season, China announced that it would increase consumption by 130,000 tons, active rubber futures markets, crude oil prices on Nymex surged over US$50 a barrel, strengthening Thai Baht and Rupiah, active buying activities from China and tire-makers, and Tsunami on 26 December caused worries over tight supplies • 2005: Tight supplies, strong demand from major tire-makers, low stocks in China and Japan, hike in oil prices to US$70.85 a barrel on 29 August, floods in the South of Thailand and Malaysian Peninsular, and typhoon Damrey hit Hainan on 26 September Source: IRCo

2006: Global economy remained firm, supply and demand looked balanced but the rubber price shot up to the peak in early July due to high speculation and over-bought, especially on TOCOM. The rubber price fell to the floor in late November before rebounding afterwards. We saw delayed shipments of exporters in the first half of the year and defaults in taking delivery of buyers in the second half of the year • 2007: firm global economy, tight supplies during Jan – May, Floods in Northern Sumatra in Indonesia and Souhthern Malaysia, early wintering in Southern Thailand was expected to reduce production by around 30 – 40 percent, strengthening of regional currencies and the China’s yuan, China has changed its strategy to buy from hand-to-mouth, TOCOM is less aggressive than last year. Source: IRCo

Movement (con’t) The Fall: came from (1995 – 2001) • Less bargaining power of NR producing countries despite firm global economy • Asian economic crisis in mid-1997 The Rise: has come from (2002 – the present) • The global economy has rebounded to the present • The China factor • Establishment of Tripartite rubber cooperation among Thailand, Indonesia, Malaysia Source: IRCo

Concerns • Economic imbalance between the U.S. and China will decelerate the global economic growth • Possibility of China’s economic bubble if the government cannot administer the fiscal and financial policies efficiently and effectively • High oil prices will decelerate the global economic growth • Strong influence on rubber futures by hedge funds will remain • Imbalance of rubber supply and demand might be seen • Geopolitical confrontation will be more severe and will be a bearish factor for the rubber industry • Global climate change will affect the NR production pattern Source: IRCo

How to get rid of these concerns Strategies:- • Manage NR supply to meet its demand at a remunerative and sustainable price for both producers and consumers through “The Tripartite Rubber Council: ITRC.” • To manage NR marketing and to stabilize rubber prices by regional cooperation through “International Rubber Consortium Limited: IRCo” Source: IRCo

To strengthen physical rubber markets by establishing “rubber auction markets and their networks” among the ITRC Products: RSS3, STR20, SIR20, SMR20 Source: IRCo

Strategies:- (con’t) • Encourage domestic rubber investment to create value-added rubber products • ITRC’s governments have to invest in Human Resource Development (HRD) to increase rubber productivity, to lower cost of production, and to improve rubber technologies • MIS of IRCo Source: IRCo

MIS of IRCo Source: IRCo

IV. Regional Markets for Industrial Rubber Products Table 11. Demand in Tire and non – Tire, 1995 – 2035 Source: LMC & IRCo

Figure 11. Demand in Tire and non – Tire, 1995 – 2035 Source: LMC

Conclusion • Asia-Pacific will be the biggest rubber consumers, especially China and India because of an increase of domestic demand in vehicles. Asia-Pacific will the major production bases of tires and non-tire goods for the global market • Demand of rubber in the region will grow by 9.06 % during 2010 – 2035 as compared to 3.92 % during 1995 – 2006 that means the world needs additional 14.72 million tons of rubber in 2035 • Regional rubber prices in the future will depend on the global economic and population growth, energy prices and demand and supply of natural rubber (NR), and the cooperation among rubber producing countries. For this reason, NR producing countries have to manage its supply efficiently to prevent any surplus of NR in the rubber market • Regional markets for industrial rubber products for both tire and non-tire sectors will rise at a regressive rate due to substitutionof other raw materials

Thank You for Your Attention

by Yium Tavarolit Chief Secretary and Economist International Rubber Consortium Limited (IRCo)