Mr S Iswaran at the World Rubber Summit

OPENING ADDRESS BY MR S ISWARAN, SENIOR MINISTER OF STATE FOR TRADE & INDUSTRY, AT THE WORLD RUBBER SUMMIT ON MONDAY, 23 MARCH 2009, 0900 HRS AT SINGAPORE EXPO

Dr Hidde Smit, Secretary General of the International Rubber Study Group

Distinguished guests

Ladies and gentlemen

A very good morning to all of you, and to our overseas friends, a warm welcome to Singapore.

1. It gives me great pleasure to be here at the World Rubber Summit, organised by the International Rubber Study Group (IRSG) and hosted by Singapore. The World Rubber Summit has been a leading global rubber conference to discuss major trends and fundamental issues in the rubber industry.

2. This is the first time that IRSG is holding the World Rubber Summit in Singapore, almost nine months after IRSG relocated its headquarters from the UK to Singapore.This move allows IRSG to tap into the rich industry knowledge in the region, and gain easy access to some of the world’s major rubber producing countries near Singapore.Singapore is fully supportive of IRSG’s plans to expand its coverage in the region and enhance its statistical outputs with the help of the industry.

3. The increasing engagement between Singapore and IRSG, coupled with the excellent turnout of member governments and industry captains today, serves to augment Singapore’s historical position as the global rubber trading hub.

Singapore as a rubber trading hub

4. Singapore’s international trading sector has grown steadily over the years. Presently, it is estimated that Singapore as a key rubber trading hub handles more than 50% of the world’s annual natural rubber trade

[1]

.

5. Singapore’s relevance as a rubber trading hub has recently been further validated by the commitment of one of the world’s largest chemical groups, Lanxess. The company is investing a record €400 million for a butyl rubber production site in Singapore.From 2012, Lanxess’s site in Singapore is expected to produce up to 100,000 tonnes of butyl rubber annually, making it the largest facility of its type in Asia

[2]

.

6. In addition, Singapore is also recognised as the global pricing centre for the physical trade of rubber, with more than 80% of global rubber trade priced off the Singapore Commodity Exchange (SICOM) prices

[3]

. Neither a producer nor a major consumer of natural rubber, Singapore serves as a neutral trading hub that generates financing, procurement and risk management activities.

7. SICOM as well as the Singapore International Arbitration Centre work closely to serve the demands of the international business community in fast-developing Asia for neutral, efficient and reliable dispute resolution to legal issues.This has contributed to Singapore’s position today as the arbitration hub of choice for disputes in the region.

Rubber industry in Singapore

8. Singapore’s strength as a rubber trading centre can be attributed to our vibrant ecosystem of industry players across the entire value chain. Many of the producers and processors have set up offices in Singapore to market their products globally. In this respect, Singapore is fortunate to be located near the top rubber producing countries, which account for over 70% of the global rubber output.

9. On the other end of the value chain, the world’s top tier manufacturers, including Bridgestone and Goodyear, use Singapore as their global natural rubber procurement base. The presence of top trading houses such as Louis Dreyfus adds further buzz and depth to the sector. Singapore also has its home-grown champions such as Lee Rubber, which is a major player in the global rubber industry. In addition, there is a considerable depth of expertise in the supporting industry, including rubber dealers, brokers, packers, shippers and other logistics companies in Singapore to serve the market.

10. Singapore has been a member of the IRSG and the Association of Natural Rubber Producing Countries since their inception. Locally, associations such as the Rubber Trade Association of Singapore and the Singapore International Chamber of Commerce Rubber Association actively promote the industry’s interest. The industry also works closely with International Enterprise (IE) Singapore, the lead government agency promoting international trade. IE Singapore represents the interests of the industry at multi-lateral forums and assists global trading companies to establish their base here.

Outlook for Singapore’s rubber industry

11. 2008 was a tumultuous year for the global commodities sector.The prices of commodities hit historical highs and their fall has been equally rapid, triggered by the crisis in the financial sector and exacerbated by the deteriorating global economy.

12. The end of 2008 saw rubber prices being halved from over US$4 per tonne to almost US$1.30 per tonne

[4]

. Weaker demand from the global auto sector has also affected rubber prices given that the tyre manufacturing industry accounts for around 70% of the global consumption of natural rubber

[5]

.

13. The grim outlook is exacerbated by the tight credit environment with banks becoming more risk averse.In Singapore, the government is doing it’s part to ensure that credit is available to viable companies here through loan insurance and export credit programmes.Our rubber industry players have sought aid through these programmes during these challenging times.

14. With the economic outlook remaining uncertain, companies across the entire value chain of the rubber industry would have to adapt and quickly adjust to the new supply-demand dynamics.

15. Today, we are privileged to have industry leaders and senior government officials here to share their insights on the tyre, synthetic rubber, oil and feedstock, natural rubber as well as rubber futures sectors.In such challenging times, it is all the more important for us to pool our knowledge and collectively strategise our way through the turbulence.The World Rubber Summit presents an excellent platform and a timely opportunity for both governments and industry to discuss trends and exchange ideas.

Conclusion

16. I therefore would like to encourage everyone here to fully utilise this opportunity to build, broaden and renew your knowledge and network.I wish you a fruitful conference.

Thank you  

[1] “Geojit enters Singapore commodity bourse”, The Hindu Business Line, available at http://www.thehindubusinessline.com/2004/07/07/stories/2004070700421300.htm

[2] “Lanxess in Singapore”, available at http://www1.lanxessgoesasia.com/Countries/Singapore/index,cat12-2.html

[3] Source: Singapore Commodity Exchange

[4] Based on SICOM’s RSS 3 futures prices

[5] “Rubber producers ready for more output cuts this year”, 22 January 2009, Business Times