Rubber Markets 2007 Domestic Prices Influencing the Export Sector Presented by Yium Tavarolit Chief Secretary and Economist International Rubber Consortium Limited (IRCo) Sheraton Towers, Singapore 31 October 2007

The scenario of Thailand’s rubber production due to external factors in today’s context (what could possibly happen at present?) Introduction

The Map of Thailand with Locations of Rubber Plantation Northern Part 2 Chiang Mai 3 Chiang Rai 12 Phitsanulok Northeastern Part 21 Nong Khai 20 Udon Thani 41 Burirum Central Part 29 Kanchana Buri 45 Ratcha Buri Eastern Part 58 Rayong 59 Chantha Buri Southern Part (East Coast) 65 Surat Thani 69 Nakhornsi Thammarat 73 Songkhla Southern Part (West Coast) 67 Krabi 70 Trang

Table 1. Planted area, production of natural rubber in Thailand, 2000 – 2005 Year Planted Area ('000 ha) Production (tons) Yield (kg/ha/yr) Mature Immature Total 2000 1,523,899 463,331 1,987,230 2,377,789 1.563 2001 1,523,407 466,867 1,990,274 2,561,120 1.681 2002 1,553,214 450,462 2,003,676 2,631,605 1.694 2003 1,601,353 416,854 2,018,207 2,860,966 1.788 2004 1,656,686 417,244 2,073,930 3,005,091 1.813 2005 1,691,588 488,129 2,179,717 2,974,832 1.756 Source: 4th ITRC Stat. Committee

Introduction (cont.) Earnings of natural rubber accounted for 346.72 billion baht (US$ 10.2 billion) in 2006 Value creation of agricultural products is one of conceptual development framework for the 10th National Economic and Social Development Plan (10th NESDP: 2007 - 2011)

National Policy on Natural Rubber Recognizing the importance of the rubber products industry as a one of potential industry and support the development of rubber products industry in five areas as follows:- Natural rubber becomes one of the most important cash crops of Thailand Continuingly increase in supply and demand for world natural rubber in response to expanding demand for world’s transportation and rising oil prices

National Policy on Natural Rubber (cont.) Constructing the well - established and strong rubber products industry and business and aiming for the Asia’s largest rubber producer by giving more emphasis on strengthening of technology, especially by providing incentives fro import of new and more efficient machinery and technology, transfer of technology to Thai personnel and establishment of R&D programs Encouraging and providing budget for R&D in productivity from upstream to downstream to the universities and research institutes Speeding up technology licensing and transfer from aboard

National Strategic Development of Rubber Products Industry and Business for Medium and Long - Term 1st: Increasing Sufficient Quality Supply of Natural Rubber Raw Materials Productivity improvement of raw materials Creating pioneer farming zones to maximize productivity and efficient supply to the rubber industry Transferring necessary agricultural knowledge and technology to rubber smallholders, and Providing suitable agricultural inputs, and managing supply of raw materials in sufficient quantities to meet industrial demand

2nd: Development of Science and Technology Supporting research on modifying and improving existing technology in SMEs Supporting knowledge transfer to the private sector to create skilled knowledge Promoting public and private latex Bio – tech R&D investment Building strong research community Enhancing the capacity of private and public research institutes and university to support SMEs Creating intellectual property with value in the commercial market

3rd: Competitiveness and Capacity Enhancement Enhancing efficiency in existing agencies concerned to coordinate networks Adjusting production processes and methods to make them more efficient and higher quality Enhancing efficiency in output distribution by improving marketing system at all levels and promoting e – commerce Developing product quality standard systems to meet international standards Promoting sustainable rubber production process Supporting establishment of The Rubber Board of Thailand

4th: Establishment of Supportive Infrastructure Reviewing and revising laws and regulations, which are barriers to the private sector for stimulating the upgrading of their production technology. Promoting and stimulating demand for made-in-Thailand rubber products by government procurement agencies and so on Accelerating logistics system development master plan Establishing rubber products standards and test centers Promoting the use of regional economic and technical cooperation bodies to expand rubber markets Sources: NESDB, Thailand and IRCo, September 2007

Table 2. Natural Rubber Production, Exports, Domestic Consumption, Stocks, and Imports of Thailand, 1996 - 2006 Year Production Exports Domestic Consumption Stocks Imports '000 tons % (+/-) 1996 1,970 - 1,763 174 148 1 1997 2,033 3.17 1,837 4.21 182 4.81 159 7.93 1998 2,076 2.13 1,839 0.12 186 2.39 210 31.48 1999 2,155 3.79 1,886 2.55 227 21.75 251 19.71 2000 2,346 8.91 2,166 14.83 243 6.89 189 -24.80 2001 2,320 -1.15 2,042 -5.73 253 4.35 213 12.92 2002 2,615 12.74 2,354 15.30 278 9.98 197 -7.66 2003 2,876 2,573 9.30 299 7.31 202 2.83 2 26.50 2004 2,984 3.77 2,637 2.47 319 6.68 233 14.99 3.99 2005 2,937 -1.58 2,632 -0.18 335 5.02 204 -12.17 -10.55 2006 3,137 6.80 2,772 5.29 321 -4.11 250 22.34 -24.04 Average Annual Growth   4.86 4.82 6.51 6.76 Source: RRIT, Thailand

Table 3. Natural Rubber Production of Thailand by Types, 1996 - 2006 Unit: '000 tons Year RSS STR Conc. Latex * Crepe Others Total 1999 1,154 623 300 3 73 2,155 2000 1,124 827 292 9 94 2,346 2001 928 858 464 12 58 2,320 2002 1,100 967 471 13 64 2,615 2003 1,237 1,035 489 106 2,876 2004 1,283 1,074 507 110 2,984 2005 1,028 1,233 602 65 2,937 2006 1,192 722 185 3,137 Proportion (%) 41.59 36.56 18.00 0.31 3.54 100 Source: RRIT, Thailand

Table 4. Natural Rubber Exports of Thailand by Types, 1996 - 2006 Unit: '000 tons Year RSS STR Conc. Latex * Others Total 1996 1,180 324 203 56 1,763 1997 1,095 456 225 60 1,837 1998 1,047 480 246 66 1,839 1999 1,071 541 217 57 1,886 2000 1,006 808 285 67 2,166 2001 870 763 348 61 2,042 2002 1,050 829 382 93 2,354 2003 1,150 913 409 102 2,573 2004 1,003 998 493 143 2,637 2005 921 1,109 489 113 2,632 2006 939 1,069 556 207 2,772 Proportion (%) 46.25 33.84 15.72 4.18 100 Source: RRIT, Thailand Note: * Dry Rubber Content

Table 5. Exports of RSS of Thailand by Grades, 1996 - 2006 Unit: '000 tons Year RSS's Grades Total 1X 1 2 3 4 5 1996 - 14 973 172 17 1,180 1997 12 907 158 16 1,095 1998 15 9 833 180 11 1,047 1999 27 831 182 28 1,071 2000 19 805 165 1,006 2001 723 118 10 870 2002 855 169 1,050 2003 29 939 171 7 1,150 2004 796 173 1,003 2005 23 726 921 2006 769 150 Proportion (%) 0.03 1.91 0.28 80.78 15.90 1.10 100 Source: RRIT, Thailand

Table 6. Exports of TSR of Thailand by Grades, 1996 - 2006 Unit: '000 tons Year STR Un-specified Block Total XL 5L 5 10 20 CV 1996 - 4 1 8 246 65 324 1997 9 12 334 456 1998 7 16 309 148 480 1999 29 415 89 541 2000 2 86 559 149 808 2001 536 130 763 2002 3 595 11 131 829 2003 79 637 13 178 913 2004 74 703 14 202 998 2005 6 60 774 19 249 1,109 2006 70 719 252 1,069 Proportion (%) 0.08 0.73 0.14 7.32 70.29 1.02 20.40 100 Source: RRIT, Thailand

Table 7. Exports of Other Types of Natural Rubber of Thailand, 1996 - 2006 Unit: '000 tons Year Air Dried Sheet Crepe Skim USS Others Total 1996 18 1 20 6 11 56 1997 14 24 9 15 60 1998 27 10 17 66 1999 32 2 13 57 2000 40 67 2001 7 4 33 61 2002 41 36 93 2003 5 38 47 102 2004 44 84 143 2005 113 2006 3 50 140 207 Proportion (%) 12.14 3.17 39.70 3.24 42.04 100 Source: RRIT, Thailand

Table 8. Imports of Thai Natural Rubber by Countries, 1996 - 2006 Unit: '000 tons Year China Japan U.S. Malaysia S.Korea EU Others Total 1996 530 383 174 111 102 212 251 1,763 1997 563 300 240 132 122 210 270 1,837 1998 500 238 280 179 123 226 294 1,839 1999 410 243 236 155 157 241 344 1,886 2000 505 418 330 244 136 231 303 2,166 2001 435 368 302 297 139 233 267 2,042 2002 499 437 382 364 266 322 2,354 2003 543 651 279 365 166 275 2,573 2004 526 620 249 384 172 292 395 2,637 2005 540 573 404 185 281 411 2,632 2006 493 747 211 443 173 262 2,772 Proportion (%) 23.03 20.31 11.92 12.56 6.59 11.22 14.59 100 Source: RRIT, Thailand

Table 9. Exports of Thai Natural Rubber by Ports/Customs Houses, 1996 - 2006 Unit: '000 tons Year Ports Customs Houses Others Total BKK Songkhla Laem-chabang Phuket Chiang Saen Padang Besar Sadao Betong 1996 540 472 18 96 473 78 31 55 1,763 1997 519 370 28 139 572 93 39 77 1,837 1998 509 367 41 116 538 152 34 83 1,839 1999 484 326 60 102 684 133 27 69 1,886 2000 273 446 142 247 740 203 32 82 2,166 2001 166 429 64 222 710 252 171 2,042 2002 430 408 199 771 303 35 148 2,354 2003 454 158 3 852 338 38 2,573 2004 340 387 145 114 26 946 359 278 2,637 2005 321 317 138 98 935 475 274 2,632 2006 335 307 164 90 24 1,027 450 337 2,772 Proportion (%) 4 6 12 2 7 100 Source: RRIT, Thailand

Table 10. Value of Natural Rubber Exports of Thailand by Types, 1996 - 2006 Unit: Million Baht Year RSS STR Conc. Latex Others Total 1996 41,658 11,639 7,875 129 61,301 1997 32,993 14,615 7,742 201 55,551 1998 30,931 15,096 8,775 214 55,015 1999 24,760 12,507 6,299 525 44,092 2000 25,130 20,885 7,067 123 53,205 2001 23,585 22,276 12,658 182 58,700 2002 29,818 26,824 17,433 531 74,606 2003 43,265 45,264 26,857 441 115,827 2004 49,050 53,403 34,652 500 137,604 2005 47,902 63,937 36,536 494 148,868 2006 68,620 83,870 52,358 513 205,361 Proportion (%) 41.35 36.66 21.61 0.38 100 Source: RRIT, Thailand

Table 11. Natural Rubber Consumption of Thailand by Types, 1996 - 2006 Unit: '000 tons Year STR Conc. Latex RSS ADS Others Crepe Total 1996 63 39 49 7 9 174 1997 66 41 50 10 182 1998 67 52 43 11 186 1999 78 71 61 4 2 227 2000 88 81 55 1 243 2001 96 75 3 253 2002 107 69 278 2003 115 83 74 12 299 2004 123 79 13 319 2005 129 93 82 14 335 2006 104 132 70 8 5 321 Proportion (%) 36.78 29.59 24.56 3.85 3.58 1.63 100 Source: RRIT, Thailand

Table 12. Natural Rubber Consumption of Thailand by Types of Products, 2003 - 2006 Unit: '000 tons Types of Products 2003 2004 2005 2006 1. Tires 124 130 140 137 2. Elastic 27 40 44 68 3. Glove 55 57 58 52 4. Tire and Tube for motorcycles 22 20 25 5. Rubber band 26 16 6. Canvas shoes & Foam Candle 11 5 7. Others 12 10 4 8. Shoe Layer 3 9. Glue 1 2 10. Belt 11. Accessories part for motor vehicle 6 12. Hose 13. Scientific instruments 14. Foam Products 15. Retreading 7 8 16. Ballon Total 298 319 335 321 Source: RRIT, Thailand

Table 13. Export Value of Natural Rubber Products of Thailand, 2004 - 2006 Unit: Million Baht Types of Products 2004 2005 2006 Tire & Tube for Motorcars 25,722 34,575 43,583 Glove 23,916 26,078 27,288 Others 7,324 10,474 11,293 Compound Rubber 4,473 4,203 12,927 Elastic 4,096 4,630 6,866 Gasket / Seal 2,113 2,324 2,743 Hose 3,385 3,496 4,060 Rubber Band 1,841 1,912 2,468 Piping and Tubing Tires 1,542 1,661 1,901 Condom 1,493 1,844 1,796 Belts 1,000 1,256 1,057 Floor Tiles 967 457 484 Apparel Clothing 381 563 573 Nipple 217 211 184 Vulcanised Rubber 112 611 293 Rubber Eraser 33 32 28 Total 78,628 94,351 117,577 Source: RRIT, Thailand

Natural Rubber Prices in Thailand, 1996 – 2007 The Fall: 1996 – 2001 The global economic slowdown Less bargaining power of NR producing countries despite firm global economy in some years Low prices of synthetic rubber Asian economic crisis in mid-1997 The overhang of Thai government stockpile The demise of INRO in 1999

The Rise: 2002 – 2007 The global economy has rebounded steadily to the present Higher demand for rubber from China, India, and the emerging economies Higher prices of synthetic rubber due to rising oil prices Erratic weather and more natural disasters due to the global climate change Establishment of Tripartite rubber cooperation among Thailand, Indonesia and Malaysia (ITRC and IRCo)

Table 13. Natural Rubber Prices of Thailand, 1997 - 2007* Year Conc. Latex USS3 STR20 RSS3 Baht US Cents % (+/-) 1997 24.23 77.23 - 27.25 86.86 29.87 95.21 30.18 96.20 1998 25.30 61.15 -0.21 25.68 62.07 -0.29 27.86 67.34 29.44 71.16 -0.26 1999 19.88 52.54 -0.14 19.85 52.46 -0.15 22.65 59.86 23.51 62.13 -0.13 2000 22.98 57.22 0.09 23.43 58.34 0.11 25.70 63.99 26.84 66.83 0.08 2001 20.84 46.90 -0.18 22.55 50.75 23.94 53.88 25.34 57.03 2002 25.73 59.89 0.28 29.15 67.85 0.34 32.39 75.40 32.69 76.09 0.33 2003 35.60 85.81 0.43 40.17 96.83 41.97 101.17 44.45 107.15 0.41 2004 39.96 99.35 0.16 46.66 116.00 0.20 49.26 122.47 51.72 128.58 2005 44.85 111.51 0.12 55.19 137.22 0.18 56.51 140.50 60.16 149.58 2006 57.12 150.78 0.35 72.12 190.38 0.39 75.63 199.65 79.79 210.63 2007* 52.91 152.10 0.01 70.85 203.64 0.07 73.46 211.19 0.04 77.20 221.88 0.05 % Change (1997-2006) 1.18 0.97 1.60 1.34 1.46 1.22 1.56 1.31 Source: RRIT, Thailand Note: * * Average of Jan - Sep 2007

Figure 1. Natural Rubber Prices of Thailand, 1997 - 2007* Note: * Average of Jan - Sep 2007

Table 14. Tokyo and Singapore Rubber Futures Markets Year Tokyo Singapore Yen/kg % (+/-) US$/kg 1995 153.92 0.30 158.13 0.39 1996 147.59 -0.04 138.99 -0.12 1997 118.40 -0.20 99.80 -0.28 1998 92.82 -0.22 70.31 -0.30 1999 72.26 61.38 -0.13 2000 74.95 0.04 66.03 0.08 2001 66.62 -0.11 56.95 -0.14 2002 99.12 0.49 75.87 0.33 2003 128.92 107.28 0.41 2004 140.53 0.09 127.94 0.19 2005 166.12 0.18 149.25 0.17 2006 244.16 0.47 208.07 2007* 263.76 220.68 0.06 % Change (1994-2006) 71.00 40.00 Source: RRIT, Thailand Note: * * Average of Jan - Sep 2007

Figure 2. Tokyo and Singapore Rubber Futures Markets Note: * Average of Jan - Sep 2007

The Future: ?????

Conclusion The balance of supply and demand for natural and synthetic rubber will lead to a sustainable development of the rubber industry, and the physical rubber market should be strengthened in order to lower rubber prices’ volatility.

Thank you for your attention