Before the invention of the automobile in 1896, rubber was indigenous to Central and South America, used mainly for rubber balls, glues and sandals. Cultivation later shifted almost exclusively to Asia. Even today, around 70% of global supply comes from just three countries: Thailand, Indonesia and Malaysia.
Rubber is used across the chemical, agriculture, transportation and aerospace industries, but the automobile sector accounts for roughly 75% of demand — tyres, gaskets, hoses, floor mats, bumpers, airbags, window seals, brake pads and windshields are all made from natural or synthetic rubber.
Developing markets such as China and India, which lead global vehicle sales including two- and three-wheelers, have a significant influence on rubber demand. Crude oil prices are another key factor, since crude oil is used to manufacture synthetic rubber; when oil prices rise, synthetic rubber becomes more expensive relative to the natural alternative.
From a trading perspective, the value of the US dollar is closely watched. When the dollar weakens against other currencies, sellers receive more dollars for their rubber, encouraging exports to dollar-denominated markets. Around 90% of total worldwide rubber exports go to the US and China, with China the larger consumer of natural rubber.
On the supply side, rubber is structurally inelastic: rubber trees require 10–20 years of growth before they can be tapped. Shortfalls occur periodically, sometimes deliberately — the International Tripartite Rubber Council (ITRC), comprising Thailand, Indonesia and Malaysia, has previously imposed export curbs to support prices.
In 2021, poor harvests were projected in parts of Southeast Asia due to weather and leaf-fall disease, a dynamic that was also expected to support demand for natural latex gloves from Thai and Vietnamese producers. Globally, demand for rubber by type was roughly 40% natural and 60% synthetic.
This market commentary is provided by Merchant Trade Guarantee Corporation Company Limited (MTG), a non-bank financial company specialising in trade and structured-finance consultancy since 2000.