You should buy your winter tires today. When winter comes, there might not be enough rubber supply in the world to meet the growing demand.
You don’t hear about the rubber market much. But it is one of the most exciting commodities markets this year.
In a second, we will tell you what exactly is going on. And how to profit from this market, of course.
Remember, our mission here at The Financial Star is to bring to your attention the most interesting investment trends.
This year, rubber could be the commodity everyone is talking about.
Global Rubber Demand Soars
When the pandemic hit, rubber products like medical gloves were in great demand.
This year, as the developed countries are getting vaccinated and start reopening, most of the world is still battling Covid.
This means that billions of vaccine shots will need to be administered across the world. And to administer each of them, a nurse or a doctor needs to wear clean gloves.
In 2020, the world produced about 380 billion pieces of rubber gloves. This year, this number could be as high as 420 billion.
In 2022, this demand could reach over 500 billion pieces.
So even though some countries are dealing with Covid quite successfully, the long battle is far from over. Developing countries both have larger populations and are further away from being done with their vaccination programs.
This is a major source of demand for natural rubber.
But there’s something else…
Automobile demand is soaring in the developed nations. Demand for used cars, for example, was so high it pushed priced for these vehicles up 30% compared to last year.
Used pick-ups are 70% more expensive this year than in 2020, The Economist says.
The reasons for this surging demand are high Covid savings, low interest rates on car purchases, and the uncertainty around international travel.
Put simply, American drivers have cash savings, they can finance new purchases at low rates, and car travel remains the only option given that a lot of popular tourist destinations are still battling with Covid.
Meanwhile, the rubber supply might not catch up with demand starting next year…
Natural Rubber Supply Is Uncertain
Following the boom of 2011, new rubber tree plantations have been declining.
They fell from almost 600 thousand hectares in 2011 to below 100,000 in 2018 (latest data available).
It doesn’t help that rubber tree gestation takes a long time. In other words, if the demand for natural rubber surges, supply won’t be able to catch up quickly.
This is one of the reasons why Bloomberg predicts that starting in 2022, the global rubber market will be in a state of deficit.
In other words, demand will be higher than supply.
Barring a significant change in the market fundamentals, this situation could continue up until 2029.
These two forces, growing demand and the somewhat slow supply catch-up, have been driving the price of natural rubber.
Over the past 12 months, it has been up almost 50%. For comparison, a broad-based commodity index is up by just 40% over the same time frame.
This impressive performance could carry into the next several years as the world continues consuming large amounts of rubber in the form of tires, gloves, and other products.
And here’s another important part…
Synthetic rubber won’t likely replace its natural counterpart.
For example, Michelin, the world’s largest tire maker, has shown its Vision concept… it is an airless tire which is also cannot be punctured or go flat…
Consider this. This Vision concept tire is not only impossible to puncture but it’s also biodegradable.
Which means that this is one of the “future technologies” that we talk about here.
It’s high-performance, and it’s nature-friendly.
This tire will also use bio-sourced materials. So it won’t be produced using oil products, like a lot of today’s synthetic rubber products are.
In other words, the future of rubber is natural and bio-sourced.
This is why we urge you to consider investments that are related to rubber.
It has been around for ages, but powerful forces are shaping up to drive the price of this commodity higher in the coming years.
Thank you for your loyal readership,
The Financial Star Team