The Natural Rubber Supply Chain! Will it Bounce Back?

Natural Rubber Supply Chain

Subscribe Here!

The natural, and synthetic, rubber Supply Chain is another casualty of the Coronavirus pandemic. Our recent purchase of a new vehicle made us aware not only of the computer chip shortages impacting the new automobile sales market, but also the rubber market shortages threatening similar disruptions.

Rubber is used for tires, gloves, gaskets, clothing, adhesives, numerous industrial applications, hoses, water based applications (eg. diving equipment, flotation devices), and much more. It is an integral and indispensable part of our personal and professional lives.

Such pervasive usage and demand, combined with the potential for supply impacts, makes it important for us all to understand the natural and synthetic rubber Supply Chain.

Rubber Supply and Demand

Rubber is produced either naturally or synthetically. Natural rubber is derived from a rubber tree whereas synthetic rubber is a product of petrochemical processes.

Natural rubber comes from a milky white latex substance released as the bark of rubber trees is peeled back, tapped or otherwise cut. This latex is then processed so that it coagulates, or clumps, for subsequent processing, refinement and usage.

Synthetic rubber is produced using petrochemicals through a process of either solution or emulsion polymerization. Whereas the supply of natural rubber is a function of the output of rubber trees, the supply of synthetic rubber is a function of the supply of petrochemicals. Other materials are added to both synthetic and natural rubber to instill desired functional properties through the manufacturing process.

Over 90% of natural rubber comes from Asia, with Thailand, Indonesia and Malaysia making up 70% of the world’s supply of natural rubber. These countries experienced a drop in rubber production in 2020 due to the Coronavirus pandemic. The largest consumers of natural rubber are China, India and the United States, who simultaneously experienced a drop in demand in 2020 also due to the pandemic.

Unlike natural rubber, most developed countries, as well as emerging countries, manufacture synthetic rubber. More than half of the rubber (approx 60%) produced in the world is synthetic. China is the largest producer and consumer of synthetic rubber. In the second half of 2020 China had the foresight to start stockpiling rubber, leaving the rest of the world fighting over diminished supply.

See also  Amazon and Uber Impact on Logistics!

The largest use of rubber is for tires and tubes, making the Automotive industry the dominant consumer of rubber. And standard operating practice in the automotive industry is just-in-time delivery dynamics. They expect that when they want tires, for instance, tires will appear on demand. This has been a decades long paradigm, which was the aspiration of many industries, but it is the wrong supply chain practice when you are faced with a global pandemic.

The Pandemic Bounce Effect on the Rubber Supply Chain

The rubber industry was not immune from the reach of the pandemic. As happened everywhere, lockdowns constrained, if not restricted, the processing of the raw materials required for rubber as well as the subsequent refining and manufacturing steps that create finished rubber products.

The collection of the latex for natural rubber from rubber trees is an extremely labour intensive process. There is no “work from home” option for these workers. When lockdowns, or at the very least capacity restrictions, were put in place, along with contractions of labour supply, the result was that the extraction of the vital raw material needed from the rubber trees was highly constrained.

At the same time demand dropped dramatically at the beginning of the pandemic. However shortly afterwards demand for rubber rebounded, so to speak. The problem was that while demand increased, the factors constraining the supply of rubber were still largely in effect. This supply-demand imbalance was further exaggerated when China took the step to stockpile rubber in 2020, limiting the available supply for everyone else. The U.S. did not have the foresight to create a strategic stockpile of rubber.

Consistent with the limitations experienced on raw material extraction and subsequent manufacturing, logistics and distribution capacity had also contracted. Given that the majority of natural rubber comes from Asia getting this supply to North America and Europe became much more difficult with significant delays and extended delivery lead times.

Environmental Impacts and Market Dynamics

Apart from the pandemic the natural rubber supply line was already threatened by the prospects and realities of diseases and climate change impacts (eg. flooding). While planting new trees is helpful it takes 7 years for a rubber tree to mature to the point where it can be tapped. While this is a more sustainable solution it is not a short term solution.

See also  The Cannabis Supply Chain and Logistics Map!

Natural rubber supply is further impacted by market pricing, which is largely set by the Shanghai Futures Exchange. Because this price setting is done irrespective of production costs, artificially low prices disincentivize producers from sustainable production and replanting, further compromising the supply of rubber.


The demand for rubber will only increase in the future. The applications for this material are well established and there are no viable and substantive substitutes. Despite short term demand incongruities, such as that caused by the pandemic, demand is solid.

The supply of rubber is the more concerning variable. The properties of natural rubber are considered superior to synthetic rubber. Even though the overall demand for synthetic rubber is greater, that means that the specific market for natural rubber, with its preferential properties, is not likely to diminish.

But the integrity of the natural rubber Supply Chain is highly vulnerable to environmental forces, market dynamics, pricing, and demand signals. Any consumers of natural rubber specifically, will need to rethink their procurement and supply line strategies in light of these market realities.

The Automotive industry assumption that just-in-time delivery norms will continue unabated, particularly in the supply of tires and other rubber products, will likely require a rethink. Strategic rubber stockpiles and safety stocks will go a long way to mitigate any future supply line disruptions, the cost of which far outweighs the cost of holding some extra strategic inventory.

Finally, the rubber Supply Chain is in desperate need of Digital Supply Chain deployment. A Digital Supply Chain is supported by the end to end electronic connectivity of all aspects of the Supply Chain, enabling real time visibility and decision making to any circumstances anywhere in the chain.

Originally published on November 9, 2021.
%d bloggers like this: