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Amid tighter supply, Rubber prices rising

IMPORTING natural rubber—a raw material used to make some automotive parts—to the country has become costlier due to a global supply shortage.

Rubber commodity supplier Newpro Industrial Manufacturing Corp. has been feeling the pinch amid the lack of natural rubber supply as it is left with no choice but to buy the raw materials even though its prices have increased substantially.

The global shortage of rubber resulted in its import orders costing 40 to 50 percent more than they did in the last two years, the Laguna-based rubber firm said in an interview with the BusinessMirror.

“Both synthetic and natural rubber are encountering very tight supply issues and resulted to high prices,” Newpro said. “Despite this, we have to buy at increased prices to maintain our supply lines.”

With this, Newpro considers material availability as a top priority. The current global shortage in natural rubber, which it characterized as unprecedented, has prompted the firm to request for understanding and material cost support from its customers.

Newpro said it was in a difficult situation as it has to agree with the increased prices of natural rubber; otherwise, their allocation for import orders will be given to others willing to pay the price.

“Our policy of maintaining higher levels of inventory provides some cushion. However, we still have to keep buying at higher cost to ensure continued supply,” the company explained.

Newpro sources its natural rubber from Vietnam. “Quality of local natural rubber is not consistent for the standards of the automotive industry,” the firm said.

The company said that natural rubber is a component for anti-vibration parts in a car.

The automotive anti-vibration rubber absorbs vibration when the vehicle is being driven, which provides comfort during rides. Examples of these are engine and other mounts, suspension components such as bump stops and air suspension, and damper pulleys.

Impact on production, prices

In an April 2021 report by the Association of Natural Rubber Producing Countries (ANRPC)—which Vietnam and Philippines are part of—it was noted that the pandemic delaying economic activities has affected natural rubber production.

The report noted that world production of natural rubber has a capacity of 903,000 tons but demand is at 1.129 million tons in April this year. The price of futures and physical markets for natural rubber has been “relatively” volatile, it noted, which registered a “V” trend.

“[The lockdown] may result in delays in resuming the economic activities completely for full recovery due to health concerns,” ANRPC said. “Moreover, other uncertainties may arise from geopolitical tensions, trade war and other pressing issues, as commodity market is relatively sensitive to the global development.”

Other members of ANRPC are Bangladesh, Cambodia, China, Indonesia, Malaysia, Myanmar, Papua New Guinea, Singapore, Sri Lanka and Thailand. The members accounted for around 90 percent of the natural rubber’s global production in 2018.

According to the Philippine Statistics Authority, the production of rubber cup lumps in the country reached 155.18 thousand metric tons (MT) in October to December last year, which is 2.2 percent more than the 151.79 thousand MT output in the same period in 2019.

Forecasting supply needs

For automotive firm Adventure Cycle Philippines Inc. (ACPI), forecasting supply orders is a must to make sure it has enough parts and materials, including rubber.

“We…make use of finished rubber products provided by our suppliers for spare parts and other materials needed for motorcycle assembly in our factory under KTM Asia Motorcycle Manufacturing Inc.,” ACPI President and Chief Operating Officer Andre Angelo S. Santos told the BusinessMirror.

In 2017, Adventure Cycle inaugurated its KTM manufacturing facility at the Laguna Technopark in Sta. Rosa, Laguna.

“Our spare parts supply has been quite consistent, as well as our material supply on the manufacturing side.  A shortage would cause us to order stocks in advance, which would impact our storage costs,” Santos said.

While advancing orders will temporarily bloat the inventory, he explained this will ensure smooth supply of raw materials for the coming months.

He also advised the automotive sector to line up other suppliers as well to ensure a robust supply chain.

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