RRI.CO.ID, Jakarta - Global rubber prices have started to rise again recently. The increase comes as tensions in the Middle East continue to escalate, pushing natural rubber prices close to levels last seen in 2013.
Natural rubber is currently trading at around $2.49 per kilogram. At the same time, global crude oil prices have risen above $100 per barrel.
Rubber prices have historically been driven higher by rising military demand during periods of conflict. Higher demand for rubber products used for military needs can support prices.
Rising crude oil prices may also increase demand for natural rubber as an alternative to synthetic rubber. This is known as positive cross-price elasticity of demand, where higher prices for one product can increase demand for its substitute.
If the conflict between Iran and the United States continues through the end of US President Donald Trump's current presidential term, global rubber prices could remain high or rise further. The highest rubber price in recent history was recorded in August 2011, when it reached around $4.70 per kilogram.
However, rubber prices have never returned to that level since then. High rubber prices can encourage manufacturers to switch from natural rubber to synthetic rubber, which can limit further price increases.
Looking ahead, several factors could support higher rubber prices. Further conflict escalation and unfavorable weather conditions that reduce rubber production could both put additional pressure on global supply and push prices higher.
Writer: Gunawan Benjamin (Economist, UISU)
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