ISTORICAL REVIEW PROGRAM RELEASE AS9
THE RUBBER SITUATION IN THE COMMUNIST COUNTRIES0
CIA HISTORICAL REVIEW PROGRAM RELEASE AS9
KBtOSAHOlK FOB: Kr. JEoanad E. detain
dbief. Industrial and atmto^lc
Baterlalartoeat of Stata
Robber Slteatlon In the CcbsbbiIc* Cc*mtries0
ntafly lain resnooae to yoor request of. litount
far en trpdatitts ofreport entitlao, "to* Crrrrrrrlct Market rWtiaeaerOA/EE elieveill rina theoseful to yoer preparotiorn: for theAesssbl* of tho Irrtarust local Hubber Study Gxsep.
tUnea the robber caxsTnrptlon, production, and
cxmtriee tta^*end prospectsTO, it else diecoeees the relevance of Ccasaaviet robber larports to the priwry proiiauua of nstorai ronber. All the data ere for natural end synthetic rubber and grcTrrlc reclsiBed robber.
Blrector -Ti TLir Besenrch
b37)
7
SuauR-irj
The rubber situation in tho Communist countrios ovor the pastbeen characterised by rapidly increasing demand, less thanin production,osultant rise in imports. for rubber have risen by almostercent annuallylargely in response to tha fest growth in output of motor Although production of synthetic robber has increasedhas not kept pace with requirements. Plans for productionrubberparticularly for the new stereo rubbers"been met, and much of tho output remains high ln coat and lowcompared with that producod in the West, because ofshortfalls, imports of rubber have not been curtailedbut, on the contrary, have increased substantially. Theannual production and consumption has widened from5 toooo0ons of an estimated rise in production of synthetic rubber of'mports of rubber are expectedeona annually during that
As in tho past, Communist Imports of rubber probably will consist predominantly of natural rubber. Natural rubber importsill be lareo, averagingons yoarly, but probably will decline somewhat in importance in the world market because of the anticipated increase in consumption by the Free World. An increaae in Free World purchases of natural rubber is predicated largely on the expected rise ln demand for rubber by the less developed ountries whose output of synthetic rubber probably will remain small. In the United States snd Western Europe, synthetic rubber willrowing ohsre of consumption,mall rise in Imports of natural rubber ia likely.
World demand for natural rubber0 probably will rangeillionillion tons annually, while output of natural rubber may amount toillion tons. This factor, coupled with possible lower prices of synthetic rubber, pointsontinued fall In the price of natural rubber. The primary producers of natural rubber, confronted with declining export prices and gonerally adverse terms of trade, will be
The term otoreorubbor refersype of synthetic rubber in which the molecular chains have specific spatial arrangements. This typo of rubbor ia uoedartial or complete substitute for natural rubber in many applications whore natural rubber hitherto has been proforred.
under considerable pressure to increase sales and to compete for existing markets. The Malaysia/Singapore region has been the largest supplier of rubber to the Communist countries and undoubtedly will make strong efforts to retain this market. Malaysia isomparatively batter position then the other primary producers to cope with the price declines because of its higher productivity and relstlvely lsrger Increases in output of rubber. ubber industry la heavily dependent on sales to tho Communist countries; such salos, notably to Communist China, accounted for about two-thirds of Ceylon's total exports of rubber By contrast, Indonesia delivered onlyorcent of its rubber exports to tho Communist countries
A.
of nou rubber by the Communist aountrios has more than doubled during tho past,caord lovel ofhousand tons Although still veil belowhousand tons used by tho US, Cqsmunlet consumption has been rising more rapidly than that in the US and the rest of the Free World (See Table l) and6 accounted for over one-fifth of the world0 thousand tons). Tho sharply increased use of rubber is attributed primarily to the rapid growth in production of tires. Tires account for roughlyercent of the rubber consumed by tbe Cccnuniot countries.
Table 1
Estimated Avorago Annual Rate of Growth of Now Rubber Consumption by the Communist Countries snd tho Free
Percent
United States
Other Free World Oountriea
The USSR i0 by far tbe largest Coesaunlst user of rubber, accounting for anons, or three-fifths of the Communist total, (The estimated consumption of rubber by the USSR, the other European Communist countries, and the Asian Communist countries60 ia shown in Although it ia the world's second largest consumer of rubber, the USSR lags well behind the industrial Woat in terms of per capita usage. Thus,oviet consumption amounted toilograms (kg)
porne-third of that in tha Unitedg)less than that in the United9 kg) wOH,end9
Table 2
Estimated Consumption of Now Rubber by the Communist Countriei t' 60
Thousand Metric Tons
Countries
Eastern
Far
B.
Communist consumption of rubborill continue to increase-faster than the world average (see Tablend probably will amount toillionillion tons per yoar This growth is prodioatod primarily on the probable increase in output of motor vehicle tires.
In the USSR, where motor vehicle output is expected to increase by aboutercent, the demand for tiros and other rubber goods probably will result In tho use ofillionillion tons of rubber per yearp to almostercent more than The Eastern European Communist countries likewise have programmed substantial expansions in their motor vehicle and tiro industries and probably willotal ofillion tons of rubber annually The por capita lovel of rubber consumption in the Eastern European Communist area0 will approach the present lovel in most Western European countries. Consumption of rubber in the Far Eastern Communist countries is projected atillion tona yearlyut this ostlmato ia subjoct to considerable uncertainty.
11. Production of Synthetic Rubbor
A. 6
Focilitloa for large-scale production of synthetic rubber erlot ln tho USSR, Communist China, and all tha Eastern European Communist oountrioa with the exception of Dulgarla and Hungary. isting of synthetic rubbor plants in the Coaniunist countries, soo ho Communist countrios produced anons of synthetic rubber, slightly less than one-fifth of the world total. Tbla is roughly the same share of total output asommunist production of synthetic rubber having risen at shout the- same rate as the roat of the world during the paet five years. Output of synthetic rubbor in the Comounist countries ie shown in Table 3.
Table 3
Eotlmated Production of Synthetic Rubber by tho Communist Countrios Selected
Tears
of Total)
Metric Tons
Europe
Eaot
1
Efforts by tho Communist countries to expend and improve the quantitv of synthetic rubber have generally fallen short of targets. Problems have included not only poor planning, shortages of raw materials, and delays in construction but primarily an overriding difficulty in developing tochnoloev for production of synthetic rubber and rubber intermediates. In the case of the USSR, efforts to reach commercial production of polyisoprene took more than tenell beyond the time period required by Western countries That problems with production of polyisoprene may still persist is suggestedoviet agreement with France signed6 that calls for an exchange of scientific and technical know-how on production of the isopreneochnological shortcomings also have delayed tho production of polybutadiene butyl,ype rubbers in tbe USSR and have forced the Soviet Union to 'prolong output of inferior types such as sodium butadiene beyond the deadlines set for their elimination fron produotlon. Similarly in Poland and East (joimany, output of synthetic rubber has been handicanxidby technological shortcomings with resultant reliance on outmoded, uneconomical processes. Although apparent heavy- Investments have been made in styrene-butadieno plants in Czechoslovakia and Commaniot China, output appears to havo boon well belov capacity. In all the Communist countries, tho failure to make aoro significant progress In output of synthetic rubber has resulted in largo expenditures of scarce foreign exchange for Importation of natural rubber.
B.
Although the Communist countries plan to core than double output of synthetic rubber, they undoubtedly will fall for short of this goal and ore expected to produceillion tons annuallyevertheless, an output of this magnitude0 implies an average annual growth ratef aboutercent es comparedate ofpercent during the previous four year period. Since consumption of rubber is expected to rise by onlyoercent per year. Communist self-sufficiency in rubbor should improve somewhat during tho period.
The USSR probably will produceillion tons of synthetic rubberons more than Part of the increase is expected to come from completion of often-delayed projects of earlier periods and froa operational improvements in several existing planta which are producing well below capacity. In furthering its plans for greater substitution of synthetic rubber for natural rubbor in tires, the USSR is accelerating the output of theolyisoprene ond polybutadieno. Although they probably will fall short of their apparent goal forons of otcreorubberho Soviets nevertheless will make significant gains. utput was initiated at another polybutadiene plant and possiblyew polyisoprene plant.
Production of synthetic rubber in the Eastern European Communist countries probably will rise from aooouhatonsons East Cermany uill continue to be thowith output0 estimatedons, including aomc storoorubber. All of the East European countries appear interested in producing stcroorubber and sevoral are expected to follou East Gormany's load in purchasing such plants from tho West. Hungary is the only member of this group which is not oxpeoted to havo commercial-scale output of oynthetlc rubber
III. Imports of Rubber
Communist imports ofonsisting principally of naturalave increased sharply over the years in order to fill tho gap between roquiromonta and production. hese imports have averaged closeons per yoar and6 amountedons. Bet imports of natural and synthetic rubber by the Communist countriesre shown in Table 4.
Tablo 4
The USSR is the leading Communist importer of natural rubber and is second only to the USorldwide basis. et imports of natural rubbor by the USSR rose for the second consecutive yoar and amounted toons. These increases apparently stemmed the heavy drain on stockpiles that took placehen rubber purchases dropped significantly in seeming response to foreign exchange difficulties. The reduction in heavy outlays of foreign exchange for rubber undoubtedly is one of the major objectives behind Soviet efforts to increase domestic production. It is estimated thatoreign exchange costs to the USSR for the purchase of natural rubber amounted to about US illion, or roughlyercent of the total outlays of hard currency. Other major European Communist Importers of natural rubber6 were Poland0zechoslovakia0nd East Germany0 tons).
Communisthe second largest Communist' purchaser of naturalas 'increased greatly its imports of natural rubber In the past three years and6ons, valued atillion. Because of its disagreement with Indonesia and the subsequent transfer in purchases of rubber from this market to Malaysia, Singapore, and Ceylon, China's Imports of rubber6 cost aboutercent more per ton than those During the 'same period, the world price of natural rubber declinedercent.
Communist purchases of natural rubber have been made primarily from Malaysia and Singapore, Indonesia, and Ceylon. Malaysia and Singapore suppliedons or almost two-thirds of Communist imports alaysia and Singapore accounted for aboutercent of total Communist imports, the increase oinco then resulting in large measure from Communist China's shift in purchases from Indonesia. ndonesia supplied only aboutercent of Communist imports of natural rubber in contrast with itsercent of the total Ceylon's share of tho total rose fromercent5 toercent Thailand and Cambodia have been minor suppliers of rubber to the Communist countries. The distribution of Communist imports of natural rubber56 by country of origin is shown in Figuro 1.
6. Probable Trend of Imports0
Tho gap between future rubber requirements and production indicates that the Communist imports will have, to averageons annually. Natural rubber i3 expected to retain its relative position in overall rubber imports by the Communist countries snd averageons yearly during the period. This compares with average annual imports ofons in the previous four-year period and reflects the anticipated increase In natural rubber purchases by tho Eastern European Communist countrios and tho Asian Communist countries. Purchases by
COMMUNIST NET IMPORTS OF NATURAL RUBBER BY COUNTRY OF56
the USSR aro expected to remain at the recant lovol ofonii yearly. In an apparent effort to limit, the use of natural rubber the Soviets have raised tha prices of natural rubber going to manufacturers by an average ofercent in their recent price reforms. The share of natural rubber in total new rubber used by tho Soviet tire industry reportedly vill be reduced fromercent5 to only percent
Although Communist consumption of natural rubber probably vill rise, it probably vill decline slightly in relative importance because of tho faster growth in world consumption during tho. Estimated world consumption of rubber60 is shown in Table 5.
The three major consuming areas of the free World are expected to use sore natural rubber0 in spite of tbe comparatively faster growth in their consumption of synthetic rubber. Cains in the use of natural rubber by the United States and Western Europe, howsver, will not be largo. Demands for natural rubber by other Freo World countries, particularly thoso nations which cannotynthetic rubber industry, aro expected to increase the most.
World demand for natural rubber0 ls estimated atillionillion tons annually. The potential output of natural rubber0 is estimated atillion tons.robable excess of supply ovor demand. Thla factor, coupled with possible lower prices of synthetic rubber, will exert continued downward pressure on the price of natural rubber. Sharp aberrations In the prioo of natural rubber, auch as those that have occurred in tho second halfemonstrate the sensitivity of such prices to oven modest changes in supply and demand.
C. Effect on Producers of Natural Rubber
Tbe producers of natural rubber, confronted with the prospect of lower prices, will be under considerable pressure to maximise output and sales. In this competition for markets,he world's largest producer -will continuo to have an advantage over other major suppliers and particularly over Indonesia, ito rival in output of natural rubber. Malaysia has undertaken measures for increased productivity, such as extensive planting of high yielding trees and tho adoption of modern processing techniques. In the pnst, Malaysia haseady market for its rubber, overercent of which is of high quality snd normally commands premium prices in the world market. Thlsetrend probably uill continue and enable Malaysia to dlsposo of its rubber output0 which may be aboutercent more than Although decreases in price will limit the growth In total value of exports, profits may remain high becauso of rising productivity and possible improvement in the cost structure of the industry.
in
Mini
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Hl'tii
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The outlook for Indonesia la comparatively bleak. Total earnings from rubberndoubtedly will fall, since the output of natural rubber is oxpected to incr>iase by onlyercent, or less than the anticipated fall in price. To date, Indonesia has aade relatively little progress in upgrading the quality, and price, of its rubber, much
of which it exports to Singapore for processing,onsequent loss
in valuo-added.
Ceylon uill beomewhat bettor position to cope with the -decline ln rubbor pricos, since its output of rubber is erpectod to increase by about one-fifth. On tho other hand, Ceylon has normallyarger percentage (about two-thirdsf its exports of rubber to tho Communist countries, notably Communist China. Trade with China has been conductedubber/rice barter agreement which haa yielded relatively favorable terms of trade for Ceylon. Although China has not attempted to date to exact political concessions from this trade, it is possible that Peking will use the race it quarrel with Ceylonretext for delaying6 rubber/rice barter agreement.
i
7
appendix a
synthetic rubber plants in the communist countries
Location
Gudermes"
Irkutsk area"
(planned),
sodium polymerized butadiene rubber (SKB).
nitrilo (SKN),
possible oil-extended butadiene-styrene rubber
Nizhne Konok Possibly polyisoprene.
Omsk Butadiene, methylstyrene,
styrone-butadione Latex, methyl pyridine latexes and rubber,0 (yevroprene).
Sterlitamak Oil-extended copolymer
rubber based on butane, polyisoprene, lstex.
Oil-extended copolymer
rubbers, butyle. Nitrilo rubber planned.
Temlr Tau Butadiene rubber, now type
* Locations marked withsQrlflR roprcoonc &roiifl wliorc new rubber*ro planned or undor construction.
of frost-resistant rubber.
Tol'yatti Styreno-butadione,
polylaopreno.
rubber
(planned).
VolzhskSy Polyisoprcne
Vbronesh SKB, oil-extended
copolymer,
Polyisoprene (planned).
Yaroslavl* SKB, nltrlle rubber,
butyl rubber, oil-extended,rubber, polybutadiono (planned)
'(planned).
Yefrcaov SKB, polyiaobutylene,
butyl rubber, poly-butadiene,(planned).
Yerovan Chioroprene rubber and
latex.
. SBftatex
olyisoprene (planned).
. Kolin Silicone rubber
Kralupy nad. SBR, polybutadione, polyisoprene (planned).
Slovnaft* Butadiene
polybutadiene (planned)
East SRH, nllrlle, latexes,
polybutadiene Sillcono rubber
Country
Poland
Rumania
rubber
(planned)
polyisopreno
Plock Butadiene, polybutadiene
(planned).
Gheorghe SBR Dej
olybutadiene (planned)
and nitrilo
Ch'angsbou Chloroprone
Original document.
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