It is crucial to understand industry updates and news about price fluctuations of natural and synthetic materials necessary for the production of gloves. Under development is an econometric model to be used for price forecasting.
Inflation pressures show signs of becoming a longer-term presence in China. U.S. consumers purchased cheap imported goods because the Chinese currency was kept undervalued. This led to large U.S. trade deficits. The U.S. consume fewer goods from abroad and ship out more American-made goods due to the recent upward drift in the price of imported goods.
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Currencies play a key role in commodity prices. The Yuan is up 28% against the dollar in six years. The weaker dollar helps U.S. exporters, but the stronger Yuan and higher costs within China press upward on the costs of goods for U.S. shoppers.
The U.S. recently decreased the number of oil barrels imported, due to increasing oil prices and weak demand. The quantity of oil imports has moved downward since 2005 with the expectation of this trend continuing. The high price of oil lowers consumption while increasing production, leading to fewer imports and lower fuel prices.
Along with a 2011 increase in natural rubber supply, natural rubber demand will subside due to auto production setbacks in Japan and decreased demand for automobiles in China. China's fiscal tightening will cause rubber prices to decline as the speculative demand for rubber subsides.
Natural rubber trees were planted in large scale in 2006-2007. It takes 6 to 7 years for rubber trees to produce sap. Supply is inelastic in the short-term and long-term supply will not increase markedly until 2013. According to the International Rubber Study Group, global natural rubber output is up approximately 5% year-over-year.
In 2011 China's auto sales growth is expected to decline year-over-year. China cancelled the purchase tax preferential policy and the car subsidy program for rural areas. 70% of the global rubber supply is used for tire production. According to IRSG, the total global production of tires will be down from 2010.
Natural rubber prices have soared due to oil prices, the weakening U.S. dollar, and excess liquidity. Given that GDP growth is declining in Europe, Japan, China and the United States, the demand for natural rubber will decline in the short run. As the price of latex gloves increases, the substitution effect increases the demand for vinyl and synthetic gloves.
Latex prices typically track crude oil prices. Given the current supply and demand for oil, crude oil market prices should be between - 85 per barrel. Based upon a moderation in crude oil prices and all of the above factors, latex prices will moderate or remain flat for the year.
Nitrile butadiene rubber (NBR) now constitutes 68% of total synthetic rubber consumption worldwide. The demand for NBR has soared - this increase is attributed to the production of NBR (nitrile) gloves. Roughly 60% of the material used to make nitrile gloves is butadiene.
Although latex gloves have been the preferred choice for the medical industry due to better elasticity, and cheaper average selling prices, the demand for nitrile gloves has been rising. Exports of synthetic gloves to the U.S., the European Union, Japan, Canada, Australia, China and Brazil grew by 58% year-over-year in 2010. High latex prices have made nitrile gloves cheaper and more attractive. Nitrile production techniques have advanced, closing the quality gap with latex gloves. Latex allergies are also a concern. Given that nitrile prices have been more stable than latex prices, glove manufacturers can better protect margins by controlling their inventory costs using NBR.
Supply issues negatively impact prices for nitrile gloves and petroleum-based vinyl gloves. Nitrile gloves are derivatives of oil. Raw material cost increases, transportation and fuel surcharges have risen dramatically in the past six months. Given the increase in NBR demand, manufacturers have experienced raw material shortages. Japanese manufacturers were also impacted by the recent earthquakes in Japan. Nitrile glove prices will increase in the near term.
This year, vinyl costs rose nearly 25%. With the continuing high cost of oil and a shortage of synthetic materials, prices are up on average to dollars a case. Disposable glove consumers have increased their overall demand for vinyl as latex and nitrile glove prices continue to outpace vinyl glove prices. By trading to vinyl, the substitution effect puts upward pressure on vinyl prices and will continue to do so in the near term.
Commodity Prices: Natural Rubber, Synthetic Rubber, and Vinyl
Rob M Brown, President of Gloves By Web (a division of Auric Enterprises) offers his expertise on forecasting natural rubber prices.
Visit http://www.glovesbyweb.com/glove-industry-news for updated industry news and price forecasting of natural rubber (latex), synthetic rubber (nitrile), and vinyl gloves.
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