A View from the Past to the Present and into the Future on the occasion of the 75th Anniversary of the International Rubber Study Group (IRSG)

Philip J Watson
Philip J Watson
Chief Statistician, IRSG (1979-2002)

The story of rubber begins centuries before the formation of the International Rubber Study Group. The history of natural rubber, and from its uses in the 19th century, is well documented. The impetus by Governments to develop synthetic rubber arose during the Second World War, due to the shortage of natural rubber. Prior to this conflict nearly all usage of rubber was natural – Hevea Braziliensis.

Interestingly, natural rubber is virtually a (daily) instant ‘cash’ crop in that the bulk of its world production of rubber is almost individually cultivated. Usually a smallholder will tap his rubber trees in the early morning, collect the latex later in the morning, and then sell it in the local market (or to a cooperative) in the afternoon. His rubber latex at the farm gate price (normally based on the yesterday’s world price) will then generate his income for that day.

On the other end synthetic rubber is produced around the world in manufacturing plants that synthesize it from petroleum and other minerals. The vagaries of level of the production of oil, which is often determined by the countries forming OPEC (Organisation of Petroleum Exporting Countries), are well known. Their actions in controlling the level of world production of oil over time have caused the pricing synthetic rubber (normally on a ‘cost plus’ basis) to be very difficult, especially with respect to long term contracts.

Rubber, whether it is natural or synthetic, once it has been vulcanised exhibits properties and characteristics that make these elastomers useful in all economic sectors: vehicles, footwear, construction, hospitals, medical supplies and many others. They, natural and synthetic rubber, are an indispensable in modern society as we use their products at work, at home, at play and even when we travel.

The formation of the (International) Rubber Study Group in August 1944, by the Netherlands, the United Kingdom and the United States of the America (France was admitted as a founder member after the end of WWII), had the following in its terms of reference:

The Group will meet from time to time to discuss common problems arising from the production manufacture, and use of rubber, crude, synthetic and reclaimed. Studies will be initiated and possible solutions to rubber problems will be discussed. However, the Group will not formulate and transmit recommendations to the participating Governments, although the latter will be kept fully informed of the proceedings of the Group through its representatives.

This movement towards a non-regulatory body, in response to the expected practicalities of the post-war situation, was contrary to the earlier agreements prior to WWII concerning natural rubber, namely,

  • Stevenson Scheme from 1921 to 1928
  • International Rubber Regulation Agreement 1934 to 1944

both of which were intended to achieve a degree of price stability for natural rubber and make it economic to produce. In 1947, following the formation of United Nations Conference on Trade and Development (UNCTAD) membership of the Group was extended to ‘all Governments substantially interested in the production or consumption of rubber’.

From its early days the Group collected and published rubber statistics (Rubber Statistical Bulletin from June 1946), previously undertaken by the International Rubber Regulation Committee. This continuation of the collection and dissemination of data was vitally important given that some countries has strategic stockpiles of natural rubber, natural rubber supplies were being rapidly re-established, and the anticipated sale of Government owned synthetic rubber plants – the latter of which was delayed until the mid-1950s. Thus began the era of vigorous commercial competition between natural and synthetic rubber, especially as there were new and improved types of synthetic.

As is well known, the natural rubber is obtained from the ‘tapping’ of the rubber tree. However the tree takes 5–7 years after planting to mature sufficiently to be tapped and its peak production period is from years 10–20 of its life. After this the latex flow declines until around year 25–30 when the tree should be replaced. Consequently, to maintain production and to meet future increased demand, a programme of new planting and replanting of rubber trees must be undertaken that allows for the inherent time lag.  To plan for this a time series of various historic natural rubber statistics needs to be collected. In the case of synthetic rubber, new production plants, or expansions of existing plants, may increase capacity by as much as 50,000 tonnes per annum or so in one location, but a new plant takes about 4–5 years to plan and build. There is thus a requirement from synthetic rubber producing companies for accurate statistics on the various aspects of the rubber market for their planning purposes. Consequently, today, the Secretariat of the IRSG still publishes its ‘Rubber Statistical Bulletin’, albeit now mainly in an electronic format!

From its earliest years the Secretariat had the advice and guidance of many Government Standing Committees, especially in the areas of statistics and market development (Statistical Committee and Development Committee), as well a Packaging and Marketing Committee. By the early 1970’s, with the many advisors to its Governments there was an industry committee on statistics (Committee of Expert Rubber Statisticians) to advise the Statistical Committee at its annual meetings. Later in 1983 emphasis on economic studies proliferated and hence there was set up an Economic Committee (for Governments), which was assisted by the Industry Advisory Panel.

From the late 1940’s and into the mid 1950’s concern was expressed at many meetings of the Group over the low price of natural rubber and its effect on producers. Although a draft commodity agreement for price stabilisation through market intervention reared its head in 1952-54, it was not favoured by the major consuming countries.

An innovation at the Group’s Assembly in 1962 was the introduction of a three-day symposium with some 24 presentations being heard by attendees from both Governments and the worldwide rubber industry – could this have been a forerunner of the current ‘World Rubber Summit’?

Throughout the 1950’s and 1960’s there was considerable economic growth encouraged by cheap and stable oil prices.  In line with this growth, the world production of cars and commercial vehicles increased as did the number of vehicles in use.  Cars became the primary method of personal transportation in developed economies and commercial vehicles, which became increasingly used for the transportation of goods as economic development burgeoned.  This led in turn to a steadily rising demand for all types of tyres.

By the 1960’s, the world’s tyre manufacturing sector was estimated to be using about 65% of all the natural and synthetic rubber produced.  Until the ‘radial’ revolution, in the late 1960s, tyres had been manufactured in the same way for more than half a century.  This radical change in tyre design and construction introduced such benefits as longer life and improved performance and has now virtually replaced all the conventional methods.  Because of its effects on tyre life, this has encouraged the greater use of natural rubber in truck tyres, and the replacement of natural rubber by synthetic rubber in the car tyre sector.

Assembly
Group Assembly in 1962

During the mid-1970’s, coupled with the oil price shocks of 1973 and 1979, world rubber consumption slowed and virtually stagnated. Consequently, the pressure for some method of regulation of the natural rubber market to stabilize against price fluctuations grew steadily. In fact natural rubber was one of the ten core commodities covered by the Integrated Programme for Commodities under UNCTAD for assistance.  Thus in December 1979, first International Natural Rubber Agreement (INRA) was signed by 34 countries.  This was to use buffer stock operations, under the auspices of the International Natural Rubber Organization (INRO), financed by exporters and importers of natural rubber on an equal basis, to stabilise prices, became operational for five years from October 1980 and was later extended for two years.  Two further agreements were negotiated, the last one being INRA III, drawn up in 1995.  This came into being in February 1997.

In the 1980’s, production and consumption of both types of rubber grew slowly, but natural rubber gradually increased its share of the world market to nearly 40%.  Production of natural rubber, following successful planting and replanting schemes of earlier years, kept pace with consumption, whilst capacity for general purpose synthetic rubber had not increased because of the legacy of over-capacity from the 1970’s.  In the technological field, new types of natural rubber, involving chemical treatment and blending with plastics, began to enter the market.  Even more varied synthetic speciality rubbers are being developed to meet the exacting demands of finished products which must operate in hostile environments such as the very high temperatures generated in the engine compartments of cars.

The three consecutive International Natural Rubber Agreements (INRA) generally achieved their objective of stabilizing the natural rubber price within predetermined bands. The operation of INRA III was severely disrupted shortly after it came into operation by the Asian currency crisis in late 1997.  Partly because of this, and partly because of dissatisfaction with the general level of the world’s natural rubber price, three exporting members of INRO withdrew from the Agreement.  They felt that the operation of INRA in its last few years had not succeeded in increasing the income levels of smallholders – they account for about 80-85% of the world’s output – which was one of its main objectives. The Agreement was terminated on 13 October 1999, some fifteen months before it was due to expire.

In 1983, with the expansion of the staff at the Secretariat to include two economists, the Group’s Economic Committee, on the advice of the Industry Advisory Panel, and in conjunction with the Statistical Committee, laid down the groundwork for the Secretariat’s Work Programme. Subsequently over the next two decades the economic and statistical staff wrote over ten papers per year. These papers, which covered all aspects of the world’s rubber economy, were presented at annual meetings of the Group and many of these were published. The Secretariat staff during this period also presented papers at meetings of various inter-governmental organisations (IGO), rubber associations, international commodity bodies (ICB), including the United Nation (UN) based ones and non-IGOs’. Furthermore, the Secretariat’s Chief Statistician chaired some three international committees and represented the IRSG on many other committees, such as the International Institute of Synthetic Rubber Producers (IISRP) and the Chemical Committee of the Economic Committee for Europe (ECE). He, as well, maintained excellent relationships with the World Bank, the Food and Agricultural Organisation (FAO), UNCTAD, and the International Monetary Fund (IMF), all of whom were extremely interested in the performance and future of the world’s rubber industry.

IRSG1
31st IRSG Assembly, Bangkok, Thailand

In 1990, to strengthen the Group’s links with all aspects of the rubber industry in the world, there was formed the Panel of Associates (PoA), as suggested by the Secretary-General at that time, namely Tan Sri Dr B C Sekhar. This involvement has enabled over the years industrial organisations, companies and rubber associations to access the information and publications of the Group. The strengthening, provided by the Panel of Associates, to the structure of the IRSG has put the Group at the forefront as an information source for natural and synthetic rubber and its end uses.

In the past two decades, the IRSG has led the way in providing significant contributions to the understanding of the various sectors of the worldwide rubber industry under the directions not only of its Member Governments, but also with the ever-growing of its Panel of Associates, whose latter number is now in excess of 100 members. The extensive list of papers presented at various conferences and seminars can be seen on the Secretariat’s web site. Furthermore, the continuation of the monthly data series in its Rubber Statistical Bulletin, available now in electronic format and expanded since its early beginnings in 1946, provides a sound basis for analysis by economists studying the world’s rubber industry. The provision of the quarterly Rubber Industry Report (RIR), began in the mid-1980’s, provides an excellent review and outlook in the short term for both natural and synthetic rubber. The World’s Rubber Outlook (WRO), now in its tenth year, and published twice-yearly, presents the Secretariat’s latest long-term forecast for the world’s rubber industry for the next 10 years. The report draws on complete long-term database series of natural and synthetic production and consumption, as well as their input factors, such as GDP, tyre production, GRG sales and vehicle production by major countries. These latter two publications, quarterly Report (RIR) and the Outlook (WRO), being very extensive with in-depth analysis provide an excellent basis to all producers and end users of rubber on which to plan their future supply and demand for natural and synthetic rubber, both in the short term and well into the future.

The World Rubber Summit, now held normally on an annual basis, has superseded and become an extension of the International Rubber Forum of the Group at its annual meetings.

WRS2019
World Rubber Summit 2019, Singapore

Its extensive coverage of the current world situation for rubber and its associated developments has put the IRSG at the forefront of discussions, innovative thinking and guidance for the future. Even today, there is still a continuation of the search for acceptable solutions to problems of worldwide rubber production and consumption as seen at the World Rubber Summits, which have been evident since the Group’s inception some 75 years ago, namely:

Statistics:

  • The collection and dissemination of accurate and reliable statistics on a timely basis for a monthly data series with respect to rubber production and consumption and also their input factors;
  • The storage of data for the pricing of synthetic rubber – usually based on the export value by type of synthetic rubber per tonne per month for the major producing countries;
  • The collection, where possible, of a daily price series (spot and forward) on the commodity exchanges of the major producing countries of natural rubber, couple with those on exchanges in consuming countries, especially for the two main types – namely Ribbed Smoked Sheet 3 (RSS 3) and Technically Specified Rubber grade 20 (TSR 20), as these are mainly used in heavy commercial truck tyre production.

Forecasts:

  • The provision of forecasts on rubber demand and supply for up to 10 years hence in order to assist with the planning of replanting and new planting of natural rubber, as well as the planning of the building of increased capacity for synthetic rubber throughout the world;
  • The effects of the demand/supply scenarios on the movements of the ‘world’ price of natural rubber, especially the ‘farm gate’ price , and also the way in which future oil price trends may influence the price of synthetic rubber;
  • The continual updating with the latest information available of any econometric model used in forecasting, so that any fine tuning of forecasts can be carried out quickly e.g. outbreak or cessation of hostilities – ‘random shocks’.

End Uses of Rubber:

  • The factors that affect the growth or otherwise of the world’s tyre industry, which is the main end user of rubber;
  • The technological changes in tyre design and performance for various types of tyres, especially car, light truck and heavy commercial vehicles;
  • The continued emphasis in car tyre design to obtain the best performance of the tyre coupled with long life;
  • The environmental considerations in tyre design in order to save ‘spare tyre’ weight, both for cars and trucks;
  • The effect of the changes in vehicle design and specification with the growing emphasis on electric and hybrid vehicles, whose batteries undoubtedly add additional weight;
  • The uses of rubber and its compounding with other materials in the general rubber goods (GRG) sector.

Which elastomer (natural or synthetic)?

  • Both natural and synthetic rubber have their individual characteristics that make them the preferred choice of the compounding technologist for many products;
  • In the case of tyres for cars and commercial vehicles it takes 12-24 months to change their compounding formula and then pass the relevant regulatory requirements in many major countries prior to use;
  • The use of rubber in the retreading tyre industry and its effect on the production of new tyres, especially heavy truck tyres;
  • The growing globalisation of the tyre industry and its effect on the price of rubber;
  • The possibility, although relatively minimal in heavy truck tyre sector, of substitution of synthetic rubber for natural;
  • The continued growth of synthetic rubber and its various compounds in the GRG sector, especially in some areas such as latex products;
  • The complimentary use of natural and synthetic rubber to provide the optimum combination of compound for specific purposes.

End of Life Rubber:

  • The problem associated with any rubber product is how to dispose of it at the end of its life, given that cross-linking from vulcanisation in the compounded product cannot be reversed;
  • Although in the GRG sector this problem is important, in the tyre sector it is an immense problem worldwide and yet to be solved in any meaningful way.

Shipping and Packaging:

  • In the case of both synthetic and natural rubber there is now very few problems with regards to its packaging and its maritime transportation, unlike the problems associated with natural rubber up to the mid-1970’s.

International Standards Organisation (ISO):

  • The use of rubber by companies in manufacture of products preferably needs to adhere for major countries to certain standards, namely:
    • The ISO 9000family of quality management systems (QMS) standards is designed to help organizations ensure that they meet the needs of customers and other stakeholders while meeting statutory and regulatory requirements related to a product or service; and
    • ISO 14000is a family of standards related to environmental management that exists to help organizations (a) minimize how their operations (processes, etc.) negatively affect the environment (i.e. cause adverse changes to air, water, or land); (b) comply with applicable laws, regulations, and other environmentally oriented requirements; and (c) continually improve in the above. ISO 14000 is similar to ISO 9000 quality management in that both pertain to the process of how a product is produced, rather than to the product itself.

In concluding, the International Rubber Study Group – IRSG – (recognised as an International Body through the negotiation of a Headquarters Agreement with the Government of the United Kingdom in 1978) has evolved over the years since its inception in August 1944 an autonomous intergovernmental organisation. The IRSG is now the sole multi-lateral body dedicated to discussing the many issues that affect natural rubber and synthetic rubber production, consumption, trade and recycling. Its activities, projects, and publications cover a wide range of topics, focusing on market transparency, market access and sustainable development. Membership is open to any country (i.e. Member Government) or any company (i.e. via its Panel of Associates) involved in any aspect of rubber production, its usages or international trade. The IRSG’s Mandate currently is based on:

  • Promoting International Cooperation and Developing Initiatives;
  • Providing a Global Forum and Global Platform for the World’s Rubber Sector; and
  • Increasing the Levels of Market Transparency along the Value Chain and seek Solutions.

The future for both types of rubber lies in developing raw materials tailored more closely to the requirements of the manufacturer and produced to very high standards of technical quality and consistency, especially as rubber will continue to be one of the world’s most necessary and important industrial raw materials for as far ahead as one can see.

The Secretariat staff in conjunction with the Group’s Member Governments and its Panel of Associates will now move forward to provide innovative guidelines and possible solutions, based on the latest available information technology coupled with expertise of its many advisors, to the ever-changing world pattern of rubber supply and demand, their final products and their end of life problems.


Author of the Blog:
Mr. Philip J. Watson, Chief Statistician, IRSG (1979-2002)

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