Rubber is a natural or synthetic substance characterized by elasticity, water repellence, and electrical resistance. Pre-Columbian Native South Americans discovered many uses for rubber such as containers, balls, shoes, and for waterproofing fabrics for coats and capes. The Spaniards tried to duplicate these products for many years but were unsuccessful. The first commercial application of rubber began in 1791 when Samuel Peal patented a method of waterproofing cloth by treating it with a solution of rubber and turpentine. In 1839, Charles Goodyear revolutionized the rubber industry with his discovery of a process called vulcanization, which involves combining rubber and sulfur and heating the mixture.

Natural rubber is obtained from latex, a milky white fluid, from the Hevea Brasiliensis tree. The latex is gathered by cutting a chevron shape through the bark of the rubber tree. The latex is collected in a small cup, with approximately 1 fluid ounce per cutting. The cuttings are usually done every other day until the cuttings reach the ground. The tree is then allowed to renew itself before a new tapping is started. The collected latex is strained, diluted with water, and treated with acid to clump the rubber particles together. The rubber is then pressed between rollers to consolidate the rubber into slabs or thin sheets and is air-dried or smoke-dried for shipment.

During World War II, natural rubber supplies from the Far East were terminated, and the rubber shortage accelerated the development of synthetic rubber in the US. Synthetic rubber is produced by chemical reactions, condensation or polymerization, of certain unsaturated hydrocarbons. Synthetic rubber is made of raw material derived from petroleum, coal, oil, natural gas, and acetylene and is almost identical to natural rubber in chemical and physical properties.

Natural rubber and Rubber Index futures are traded on the Osaka Mercantile Exchange (OME). The OME’s natural rubber contract is based on the RSS3 ribbed smoked sheet No. 3 while the Rubber Index Futures Contract is based on a composite of 8 component grades from 6 component rubber markets in the world. Rubber futures are also traded on the Shanghai Futures Exchange (SHFE) and the Tokyo Commodity Exchange (TOCOM).

Prices – Spot crude rubber prices (No.1 smoked sheets, ribbed, plantation rubber), basis in New York, rallied sharply to an average 49.14 cents per pound in 2003, up 8% from 41.12 cents in 2002 and up by 45% from the 3-decade low of 33.88 cents posted in 2001. Rubber prices recovered in 2002 and 2003 as the US economic recovery took hold and as auto demand remained strong.

Supply – World production of rubber in 2001/2, the latest full reporting year, rose 5.5% to 7.130 million metric tons from 6.760 million metric tons in 2000/1. The world’s largest producers of rubber in 2001/2 were Thailand with 32.0% of world production, Indonesia (22.1%), India (8.9%), Malaysia (7.7%), China (6.3%), and Vietnam (4.4%). World production of synthetic rubber in 2001/2 fell by –3.5% to 10.490 million metric tons. The world’s largest producers of synthetic rubber in 2001/2 were the US with 19.7% of world production, Japan (14.0%), Russia (8.8%), and Germany (7.9%).

US production of synthetic rubber in 2002 was set to rebound upward to about 2.2 million metric tons from the 8-year low of 2.064 million metric tons posted in 2001. US production of car and truck tires in 2001 fell to 255.700 million tires from 276.765 million tires in 2000.

Demand – World consumption of natural and synthetic rubber in 2001 fell to 7.070 million metric tons from 7.340 million metric tons in 2000. The largest consumers of natural and synthetic rubber in 2001 were the US with 14% of consumption, Japan with 10%, and France and Germany with a combined 7.5%.

US consumption of natural rubber in 2002 was set to rebound upward from the 9-year low of 974,000 metric tons posted in 2001. US consumption of synthetic rubber in 2002 was on track to increase to at least 1.914 million metric tons from the 11-year low of 1.840 million metric tons in 2001.

Trade – World exports of natural rubber in 2001, the latest reporting year for the series, rose +2.4% to a record 5.070 million metric tons. The world’s largest exporters of natural rubber in 2001 were Thailand with 40% of world exports, Indonesia with 29% of world exports. Together, Thailand and Indonesia accounted for 69% of world exports.

US imports of natural rubber in 2002 were on track to rise to 1.09 million metric tons from the 8-year low of 972,000 posted in 2001. US exports of synthetic rubber in 2002 were set to rise to about 875,000 metric tons from 844,400 metric tons in 2001, which would be only moderately below the record export figure of 886,000 seen in 2000 before the world recession hit.