CONTRACTUAL RELATIONS ON RUBBER MARKETS: LESSONS FOR BUSINESS AND ECONOMIC POLICY

The choice of manufacturing organization form and contracting method on the industrial markets requires evaluation of market volatility, including identification of the risks from the side of adjacent markets. The study aims at determining the ways synthetic rubber market participants adjust to imbalances in supply and demand. The analysis of consumer properties of synthetic and natural rubbers in the context of their industrial consumption allows us to argue that these types of rubber turn out to be both complements and substitutes at the same time. What is more, some of them may belong to the same market within the product boundaries (in terms of antitrust legislation). We use foreign trade customs statistics and historical production and consumption data to identify the sources of market imbalances such as: the gap between synthetic rubber production cost and the price of natural rubber; economic bubbles caused by the fluctuations in supply and the price of natural rubber; volatility in the demand for rubber from its main consumers — tire factories. We then turn to the possible risk mitigation mechanisms that may help market participants to cope with the imbalances: formula pricing, vertical integration and horizontal differentiation. The implementation of these mechanisms in practice is illustrated through cases of Russian companies: PJSC Nizhnekamskneftekhim, PJSC TATNEFT and SIBUR. We conclude with the recommendations on tools for synthetic rubber production development.

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