TRENDS IN THE INTERNATIONAL RUBBER SITUATION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00937A000500020045-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 10
• Document Creation Date: December 9, 2016
• Document Release Date: February 13, 2001
• Sequence Number: 45
• Publication Date: July 31, 1956
• Content Type: MEMO

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?Riptreft?"..,
STA.170 ii # 56-56
31 July 1956
ST.J3J3LT: Trends in the International Rubber Situltion
1. econcxlips of Sout;least Asia. The im7ortance
rul)ber exliorts in the commies of several nations inoutheast sia
is indicated by tic follout. data:
T1BLE 1
Rubber -6xports as a 2orcentage of Country's Total i0cporto
Country 1952 12k2 1954 12.51
'alya 41 55
Indonesia 45 32
Thailand 15 12
Ceylon 25 22
54
64y
31
46
15
25:1
16
18:-/
41/ fil7ure based o-1 first six months.
TBI. 2
US Natural Rubber Imports in 1955 As a Percentagee of
Total US Imports from Selected Countries
Vietnam, Laos, and Callbodia
rkettEr
97%
Thailand
85%
Indonesia
70%
Malaya
58%
Cuylon
26%
Tk=sed on va:ue for the first nine months of 1955.
UMENTNO
199 E IN CLASS.
DECL CI
CUM. CH TS S C
NEXT REVIEW DATE:
AUTH: HB 7Q2
DATE. REVIEWER:
..e.
This memorandum has been discuosed informally with CAR
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TABLZ 3
Selected Data on Vorld Rubber Production
ratural Aubber
Thousand lon tons
19)
:Ialaya
603
572
Indonesia
794
749
Theiland
109
98
Ceylon
104
39
Vietnam
Cs-bodia j
52
60
Subtotal
1,667
oi
',765
S7nthetir! lutbery
L22._
878
United States
345
799
1
570
570
632
673
729
722
96
117
130
97
90
97
54
61
71
24
26
ism? 1,377 1767?
of dorldvs
natural rubber
34.4
3903
7.1
503
...1 4.7
936
716
2,215_
10
es a,
E148
623
IV production in non-31oc countries.
2. Post-World ar II trends in the world rubber market. The
adjustnen of world rubber sup) y to and in the postwar period has
been highly unsltisfactory to both corsumers and pro1ucers3 natural
rubber prices have fluctuated widely between a low of 170/lb in 1949
and a high of 590/1b in 1951 with hi :ray disruptink effects on the
TfiBLE 4
Average rew York Natural Rubber Prices
(Cents/pound)
1946
- 22.50
1951
- 41.10
1954
- 23.64
1947
- 20.97
1251
. 59.07
1955
. 39014
1948
- 22.01
1Y52
. 33.57
Dec
1955
. 49.31*J
1949
- 17.56
1953
- 24.23
June
1956
-(31.(r)
2/ The 'SS".?. returned to the world natural rubber market in
the latt r half of 1955.
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sEetter
economies of the nitural rubber producing netions. The underlying
coeditioes are: (A) the total world deeend for ru--ber is ire-easing
ate moderate rete, (b) the relturel rubber sup-ly is rernining stable or
increesine'et a very slow rete, and, (c) the synthetic rubber oroduction
and suply is increasi-g at a reel i rate, especially in the United
Sates. As the dynamic factor on the sup)ly side, the rete of increase
in synthetic rubber production (vis.a.vis the rate of iecrease in total
deoand) is 4 crucial factor in erice determin? tion and hence has
obvious broad economic and ,olitical imolicatioes: the 170/1b low in 1.00
resulted fro-1 an especially rapid increase in synthetic rubber production
and the 59011b high resulted fro e a slow sue)ly adjustment to a rapidly
increesod demand derived fro e the Xorean war. The sharp daunward trend
in prices in 1956 is primarily the result of a another rapid exoansion of us
synthetic rulber production in 1955 and early 1956.
3. The current eroblem foV the netural rubber eroducill_amsl.
In spite 'rorthe outlook for orowine total de .aria for rubber, the natural
rubber producing nations of southeast Asia arc now seriously concerned
over their future prospects. The principal cause for concern is the planned
rapid rate of increase in world, and particularly US, production of
synthetic rubber. This trend was outlined in rather sharp dotiil by .
In brief
the President in a messace t?he Contress on 30 Aoril 1956.
the OTM data supporting the Presidentos eessage indicate prospects for a
substantial surplus42/ of rubber oro 'ection .. synthetic and crude .. over
the next feu years with further strong pressure to drive natural rubber
prices dour toward the )rice of synthetics (now about 250/1b) and
perheps even to reduce the once of synthetics. The situation-is further
complicated by the possible comeercial orodaction in the US of ooildsoprane,
a synthetic duplication of the netural rubber molecule. This could
renove co tpletely the requirement for n'tural rubber, which is now
used in heavy duty rubber needucts and which currently comorises about
40 percent of total US rubber consumption.,
.42/ 31th Congress, 2d session, Houee(Of Representatives, Doucment 700 391*
See Appendix A0 especially p-ras0 2 and 30
41. Ss*
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4. In either of these situations, countries now highly dependent
on rubber exports would be caught in a perticularly difficult squeeze by
a prolan ed eoriod of lower rubber prices and sienificantly reduced
foreign exchange earnings. They therefore, face the prospect of
becoming increasingly less able to finance the economic development
necessary to modernize and diversify their economies at the sometime
that the need for such development is becoming even more urgent. An
external scapegoat is a eractical necessity for local political leaders.
5. Southeast Asian reaction. The short run effects have appeared
in thefbr7=7.517-17M771-7arrer )rice and reduced foreign exchange
earnines. This followed the rapid increase in synthetic rubber production
and aggressive export policies by US coepanies in corbination with the
30 April message of the President on rubber. lalaya? Sineapore, and
Indonesia reacted by announcing their intention to seek export markets
for rubber in Communist China. loreover, the Presidents message has
been interpreted in Indonesia as an "attempt to depress orices still
further" and the conclusion has been dram that the ITS is looking
toward self sufficiency in rubber. 2rile 71inister Ali of Indonesia
expressed the hope on 20 "Lay that agreement would be reached to regulate
the production of synthetic and natural rubber and that the US would
adjust synthetic production to actuel needs. These reactions are
likely to become more sharp and US relations with Southeast Asia
further complicated in the event that nntural rubber orices contInue
to decline due to incrensed production of synthetics. Go.te-rnments in
this area particularly that of Indonesia, are not likely to make any
distinction between the policy of US private enterprise and the US
goverment and they will tend to feel that the US has been insensitive
nnd unsympathetic to their economic eroblems.
6. It this situation continues there is no assurance that the
qeSR will not significantly increase its spot rubber purchases, either
directly or through Communist China or the European Satellites.
Although there are no firm data on the Soviet rubber position, it is
believed that part of the Soviet current rubber needs have been net since
1953 by reducing the natural rubber stockpiles. Because of this and
the erowine USSR needs for various kinds of rubber, there is a better
than even chance that the ussa will further increase its natural rubber
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acquisitions in the near PuturQ. After returning to the rubber market
in 1955, the Soviet Union purchased at the rate of about 5,000 tons per
month and subsequently in 1956 increased this rate to the present 7,000
to ;10000 tons per month.
76 It is -)robable that future Bloc purchases will be 'rade in a
co'bination of timing, fain, and place.aent that will maximize Political
advantage. Purchases might be ?leferred until the situation has
deteriorated furthnr in order to atte,o.pt to dreylatize the Bloc rescues
or might e hastened to buttress the argument that trade with the Bloc is
adv-nta,eous. Bartering economic development goods for rub r -i-ht
have considerable appeal under some circumstances. Although data are
as yet inconclusive, the 'act that scce 40 percent of Chinese rubbar
imports are transshipped te the SoviA :.nion might indicate 'ore
general :doe efforts to uniermineCancom conLrols on a general front or
to establish Communist China as the hub of trading relAionships in Asia.
25X1A9a
5 ma
4--EKTett21.?
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APPENDIX A
Brief 3acIFgoound on US S thetio Rubber Production The United
States, which consumes about 35 of the worlds natural rubber and
produces over 90i of the non.Illoc syrthetic rubber production, has an
obvious and powerful impact on the world rubber market. After the will
of 24 of the 27 government-mined synthetic ribber pant o to private
industry (in early 1955)0 to (US) output of uynthetics was pushed to
alltime records, and US exports of fl.type and butyl rubbers for the
first time in peace began to influence the demand for natural rubber
in other countries. Synthetic rubber production in the uS increased
from 620 thousand long tons in 1954 to 910 thousand in 1955, and
accounted for about 60 percent of US rubber needs in 1955, US
synthetic rubber exporto increased from 30 thousand long tons in 1954
to 93 thousand in 1955, and in early 1955 wore moving at an even higher
rate. The remaining three ;overnment.otined plants were sold to private
industry in early 1)56, and the Special :orlmission for Rubber Research,
a subsidiary of the :!ational Science Founcation? has recornended the
transfer or sale or related government research laboratories to
universities or other agencies "after June 1)560" The rolc of the US
government henceforth will be confined to the maintenance cf 3a stockpile
of natural rubber adequate to supply military and essential civilian
requiremento durin; emergency notwithstanCing interruptions of supply,"
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2. MaldelImaintl, The production plans for synthetic rubber
by US private industry are of two types, expansion of production of
existing synthetics, and the development of pelyisoprene ee the duplie
cation of the natural rubber molecule. On 30 April 1956, the President in
a message to Congress, summarized the former plans as follows:
According to the estimates prepared by the MI Ad uoc Rubber
Committee,* total US requirements for new rubber (natural and
synthetic) may b, 1960 reach a level of about 1,700000 long tone
annually. As oI Jocember 31, 19550 the BS productive capacity for
synthetic rubber was a1ready more than 10250,000 tone. B January
1958
1 1958 reported planned expansions moUld bring, synthetic capacity
to abOut 1,700000 long tons ee or equal to total new rebber
requirements for both synthetic and natural as estimated for 1960.
(Underlinim: addedo)
3. ...Som.p.t2.atncLzLtat_b2-2.ZLaLs. Although the full dynamics
of the developing situation cannot be predicted at thistimeo the broad
outlines of the market forces can be inferred from the data presented
in the 30 April 1956 Presidential Nessage to the Congress.
a. Total ns consumption of rubber (synthetic and natural),
according to the (US) Rubber :Ianufacturers Association estimate
cited by the President, has reached a plateau, and consumption will
be "lower in 1956 and 1957 and (will) thereafter increase above,
the 1955 level."
This committee comprised staff members from Commerce, Defense,
Interior, Treasury, the Rubber Producing Facilities Disposal :omission,
and the !lational Science Voundation.)
2
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v4r r q.71 synthol:,ic rnbOor p r0 duction captig':.ty
ineraasod tor bolrt 1?20,000 lor tOms on 31
planl.ed te.al 13Gox.000 long to by 1 Jarrar-,,.r All, a
nc13:41ca,? it this !olanneJ.ap.icttir Ls at1r.0 d
11,V.U3C.40 eomontio demand usf..ng 340 pe n1
riabbn4 ino?easos b;,7. no more thaxt IA anticipwl;cd by atf, t,7:-:c
U.58 will hz:ve synti-latic rabbor surplus of it "?63
long tonsi,
Th ft ewbiratf.on of (a) and (o) 11,Tn.. almovt 1-.alaror,! v-it1;or
Er:ini, January 1)56, and the absence of restrain-Ln ..Lnflugmeo
vial continua to dopross .aaural rabber prices in the Yew
markat toward t'le price of unthette rubber (now 25411.,)0
4:L TO consumption of natured ;,ubber r3malml
p1Yc3nt of ti o total zs assrmad by -tie OW data, tho rIrplma
of 753 Mcrisan3 ).onc; tuna w.1]. b Iore than ckYub:1.4. ":.)'1.c 375 thcusand
ton nte by 0011 for 'Ipotentia1. foreign nee of
(See Table A-1.) Ilorsovors Vlis 753 s;ynthatic rubbo7,.. ?v:trclu?L, Art
sotgrtente(3. by some (2(40..7)0 tons c from Caucias, Iv airman
synthetic production of at leitst 11000 tonsi, by !40,?00() to 1Z:04000
too3 .plannmd caoaci-iy in 141-to UK by .1958,,, and by post.r...,b1
proCi.IYat.10n el3e,,,Th8:7,3 in :.:,urope? Ca tho other Yand,, if th()LQpTi
ne.ural?-rubtor proportioit in not main.tained, ratur rnb-cer portr
by the TM 'lin obviously deQ.line tc long as total orcurAmpticn reJtainl
stable?
s;citgr
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TABLT. A.1
Potential world rublmr position0 1?56-60
ehousanda of long tong
Year
?
7.4or1d pro.
duction
?
Ilnited r?tates
consumption
..?
Natural for
foreign con-
1/
New rubber
foreign
consumption
1/
Potential
foreign ust
of synthet
natural
Synthetic
40 percent
sumption
ribber
and natural
natural
3/
3/
1956
1,830
1., 55583
10247
1024
lit
1957
1040
1,509
604
1,236
1,510
274
1958
1,850
1,562
625
1,225
19600
375
1959
1,860
1,616
646
10214
1,696
482
1960
1,810
1,673
669
1,201
18798
597
1/ Excluding consumption of synthetic rubber in Iron Curtain countries.
3/ These projections assume that volume production of polyiaoprene will not
develop durin4 this period,
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4. The second major threat seen by the natural rubber producers is
that polyisoprenes the new synthetic reproduction of the natural rubber
molecule, will in a few years emerge frort its present pilot plant staee
and lamely displAce natural rubber in the ITS markets and perhaps
other markets. Although the initial price of polyieoprene will probably
be about 850/1b in contrast to the present 300/10 price of natural
rubber, it is anticipated that the price will fall significantly when
developmental costa are written off and when large scale production is
attained. President Usenhower on 30 April 1356 outlined the ITS position
as follows:
Inasmuch as the US already has an adequate stockpile of natural
rubbers there is, in this connection, no immediate security problem.
In the long run, however, maintenance of secu/ity would be vastly
simplified if we could if need be -- produce types of rubber
domestically which could take the place of natural rubber in Large
trucks, bus, and airplane tires. The newly synthesized rubbers
hold this promise.
It is believed that we can rely on the erivate synthetic rubber
industry to move from laboratory synthesis to comnercial production
of synthetic "natural" rubber. Pilot plants are already being
constructed on private initiathe. The nature of the problems which
may arise when quantity production is contemplated is as yet
undefined?
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