Floods cut one percent of Thai 2011 rubber output

Thailand should produce 3.46 million tonnes of rubber this year, down one percent from a January forecast due to heavy floods, the chief of an industry body in the world's biggest rubber producer and exporter said on Tuesday. That was still 15 percent above last year's annual production of 3.0 million tonnes.
"We still believe we can produce around 3.46 million tonnes this year, or around a 1 percent drop from the previous forecast," Luckchai Kittipol, president of the Thai Rubber Association, told Reuters, referring to a previous forecast of 3.49 million tonnes made in January.
Heavy rains and severe floods in late March battered Thailand's southern rubber-producing region, damaging plantations. Newly planted trees would need up to seven years to mature and start producing latex. Luckchai said supplies from a 2004 planting expansion in Thailand's north-east would offset some lost production. Farmers in several areas who had stopped tapping latex in late February have also resumed tapping as the dry season ends, he added.
But supplies won't rise immediately. Rubber trees need weeks to rejuvenate and farmers need at least two more weeks to dry and smoke rubber so it can be sold as benchmark RSS-3 grade. "Supply should rise gradually and return to normal by June at best," Luckchai said. Thailand's monthly production capacity is 280,000-300,000 tonnes of rubber sheet.
Prices of physical Thai RSS-3 grade rubber have dropped 8.6 percent since striking a record above $6 per kg in February, as economic concerns sparked by the Middle East unrest and worries about the impact of the March 11 earthquake in Japan countered tight supply. News such as Toyota Motor Corp's decision to build cars at half the rate of its original plans in Japan at least until June 3, which would cost the world's top automaker another 120,000 vehicles in lost production, continued to dampen rubber prices.
Top producers Thailand, Indonesia and Malaysia threatened to take action to prop up prices in March, when tyre grades plunged. But Luckchai expects prices to stay above $5 per kg. That is well below a February 14 record high of $6.40 per kg but above last year's average price of $3.60 per kg. On Tuesday, Thai RSS-3 grade rubber traded at $5.85 per kg.
Global demand for rubber, both natural and synthetic, is forecast to rise to 26.1 million tonnes in 2011 from 24.4 million tonnes in 2010, the International Rubber Study Group said in March. Dealers said this was partly due to a recovery in the automotive sector, though that had not factored in the plight of Japanese automakers. The US auto industry snapped a four-year sales decline in 2010, including three consecutive months of sales above the 12 million-unit annual rate.