KUALA LUMPUR (Reuters) - Global natural rubber production is expected to fall short of consumption for the fifth consecutive year in 2025, as higher prices fail to encourage tapping in major producing countries such as Indonesia and Vietnam, a senior industry official said.

"Demand has been consistently growing in countries such as China, India and Thailand, but production is lagging because of lower prices, which rose only last year," Lekshmi Nair, senior economist of the Association of Natural Rubber Producing Countries (ANRPC) told Reuters on Wednesday.

This production shortfall is likely to sustain firm global prices, which reached a 13-year high in late 2024, and consequently increase production costs for tyre companies.

According to ANRPC, global production is expected to rise by 0.3% to 14.9 million metric tons in 2025, while demand is projected to grow at a much faster rate by 1.8% to 15.6 million tons.

After lagging behind other plantation crops like oil palm, coffee, and cocoa for more than a decade, rubber prices surged in the last quarter of 2024 due to erratic weather that curtailed production in Asian countries.

The current rubber shortage is due to tepid prices over the last seven to eight years, which resulted in lower replanting, significant slowdown in new planting, and incentivised rubber farmers to switch to more profitable crops, Nair said.

Indonesia, the world's leading palm oil producer and second-largest rubber producer, is experiencing a decline in rubber production, largely as a result of farmers converting to the more profitable oil palm cultivation, she said.

Indonesia's production in 2025 is expected to decrease by 9.8% from the previous year, totalling 2.04 million tons, while Vietnam, the third-largest producer, may see a 1.3% decline to 1.28 million tons, according to ANRPC estimates.

In contrast, Thailand, the world's largest producer, is forecast to experience a 1.2% increase in production in 2025, following a 0.4% decline in 2024.

Rubber production has recently been rising only in West African countries such as Ivory Coast, but that growth is insufficient to fulfil rising global demand and offset output losses in Southeast Asia, she said.

Demand from China and India, the world's largest consumers of natural rubber, is expected this year to rise 2.5% and 3.4%, respectively, according to ANRPC estimates.