Poor management leaves businesses in thirst for rubber materials

Vietnam is well known in the world as the fourth biggest rubber exporter. However, its businesses usually complain that they lack rubber materials for their production.

The natural rubber latex prices have been going up and down so far this year. Meanwhile, rubber export turnover in the first six months of the year was still satisfactory: 284,000 tons were exported, an increase of 17.7 percent in quantity, and increase of 90.4 percent in value. The average export price was 4410 dollars per ton, or 60 percent higher than that in the previous year.

It is expected that Vietnam’s natural rubber output would increase by four percent this year, while Vietnam plans to export 800,000 tons of rubber in 2011, worth three billion dollars.

While rubber producers keep exporting rubber latex, domestic processing enterprises keep complaining about serious rubber shortage. The Da Nang Rubber Joint Stock Company, which has kicked off the construction of the tire manufacturing factory with the designed capacity of 600,000 products per annum, has said it still has not found domestic stable supply sources. Once becoming operational, the factory will need 20,000 tons rubber latex a year.

The problem is that rubber producers all focus on exporting products, while they do not intend to sell rubber to domestic enterprises. This explains why not only Vietnamese, but foreign invested enterprises in Vietnam also have to import rubber materials for domestic production.

According to the Vietnam Rubber Association (VRA), in 2010, Vietnam exported 780,000 tons of rubber materials, earning 2.4 billion dollars. Meanwhile, domestic enterprises only used 140,000 tons of latex. Therefore, according to VRA, one should not say Vietnam is lacking rubber.

VRA Chair Le Quang Thung, who is also the Acting Chair of the Vietnam Rubber Group, said that domestic processing enterprises do not respect the market rules and usually want to buy rubber at low prices.

In 1999-2000, the rubber market was instable: the output was high, while buyers tried to force prices down, a lot of signed contracts were canceled, which then made a lot of rubber producers suffer from big stocks.

Later, the rubber production has been reorganized, while enterprises have attracted many clients. However, processing enterprises have not changed their mind. Therefore, rubber producers do not want to do business with the domestic enterprises.

Thung has also pointed out that Vietnam lacks the connection among enterprises. In the past, the then Vietnam Rubber Corporation wanted to become the strategic shareholder of the Vietnam Chemical Corporation (now the Vietnam Chemical Group) to provide materials for production. However, the chemical group did not accept the cooperation.

Analysts have pointed out that rubber producers should not be blamed on the rubber material shortage. It is the bad management mechanism which has led to the big exports and the serious material shortage.

However, they have pointed out that rubber processing companies should respect the market rules when collecting rubber by accepting the prices at which rubber producers sell to foreign partners.

Another solution has been suggested that tire manufacturers or the industries which need rubber materials for production should become shareholders of rubber companies, in order to get the priority in material collection.

China remains the biggest buyer of Vietnamese rubber exporters. It is expected that Chinese glove and tire factories would increase the imports due to the sharp falls of the rubber stocks and the increasingly high demand.

In related news, the Ministry of Finance on July 27 released the draft circular stipulating the export tariffs of some rubber products, which said the rubber products belonging to groups 4002 and 4002 would see the tariff increasing from three percent currently to five percent. – Vietnamnet

Tags: Vietnam Rubber, Vietnam rubber exports