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Tire industry grapples with raw materials challenges

researchsnappy by researchsnappy
December 24, 2019
in Healthcare Research
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Tire industry grapples with raw materials challenges
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Despite the major investments needed to keep up with environmental challenges, the carbon black industry is primed for innovation in its materials, manufacturing and business model, according to Mr. Rist.

“Cabot is committed to partnering in innovation for meeting challenges of performance and sustainability,” he said.

Natural rubber is obviously a vital component in a wide range of household, industrial, transportation and medical goods, according to Dennis Corson, senior vice president, sales and operations at Alan L. Grant Polymer.

“Two-thirds of natural rubber goes to tires, but many other applications wouldn’t be possible without it,” Mr. Corson said.

This makes the ebb and flow of NR supply and demand especially problematic for manufacturers and consumers dependent on the material, he said.

NR prices reached $6 per kilogram in 2010, prompting growers to plant rubber trees, according to Mr. Corson. Five to seven years later, the trees matured, creating an oversupply without a corresponding increase in demand, he said.

Sagging prices have been a disaster for NR smallholders, who produce 90% of the world’s rubber, according to Mr. Corson.

There are 1.5 million smallholders in Indonesia alone, he said. The average smallholder in Indonesia has a five-acre plot of land and makes $69 a month versus the average Indonesian monthly wage of $161, he said.

“The natural rubber price environment is unsustainable,” he said. “Prices have reached a 10-year low and are 40% below the 10-year average.”

Under these circumstances, many NR smallholders are turning to other crops, such as cassava or palm, or leaving farming altogether, he said.

Mr. Corson said global NR supply will grow slowly to 14.8 million metric tons in 2021 from 14.3 million in 2019.

NR demand will equal supply in those years and the upward trajectory of demand shows little sign of slowing down, he said.

“New planting is not sufficient to meet increasing demand,” Mr. Corson said. “Sooner or later there will be a shortage.”

Meanwhile, global GDP growth in 2020 is projected at 3.6%, he said. China has a $1.6 trillion infrastructure plan in the works and Germany has one worth $325 billion, he said.

“I hope the U.S. will get it together to fix its roads and bridges,” he said.

Ride-sharing and mobility-as-a-service are resulting in more miles driven and a greater need for replacement tires and parts, according to Mr. Corson.

Also, demand for NR sustainability and transparency are changing the supply chain for NR irrevocably, he said.

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