Prices and markets challenge rubber export companies

Rubber exporters say that they are facing “double difficulty” as export prices plunge while export markets are unstable.

According to Vietnam Rubber Association (VRA), in May 2010, Vietnam exported only 20,000 tons of rubber, a decrease of 12,000 tons over April 2010 (32,000 tons). In the first five months of 2010, the total volume of exports was 176,000 tons, worth $479 million, a decrease of 4.4 percent in quantity, but an increase of 85 percent in value in comparison with the same period of 2009.

The average export price in the first five months of the year was $2750-2800 per ton, an increase of 100 percent over the same period of last year ($1250-1300 per ton).

According to Tran Thuy Hoa, VRA Secretary General, thanks to the recovery of the world’s industrial production and decreased supply (it was not harvest time), the world rubber price has been rising continuously since the end of 2009. This pushed Vietnam’s rubber export price up in April 2010, exceeding the highest peak of 2008 and reaching $3200 per ton.

According to Hoa, after reaching its zenith, the export price is now on a downturn since the beginning of May, making the average export price drop to $2600 per ton. China, the biggest importer of Vietnam’s natural rubber, has stopped importing rubber across the border and sold 200,000 tons of rubber it reserved.

Statistics show that, of the total revenue of $1.2 billion from rubber exports in 2009, China alone consumed $800 million in products, or 64 percent of the total export turnover. Vietnam now has 543 enterprises that export rubber, and 165 export rubber to China across the border.

“The mode of exporting rubber across the border has been chosen by many companies, because they find it more convenient to follow export procedures, make payments and pay tax. Moreover, as Vietnam neighbors China, it is more convenient than exporting to other markets,” Hoa explained.

She went on to say that in 2009, when the demand for natural rubber decreased dramatically due to the global economic crisis, China’s demand for rubber expanded, thanks to the country’s policy on encouraging automobile production. Therefore, because of high exports to China, Vietnam’s 2009 rubber exports were still encouraging.

Though troubles occur every year with border export due to changes in Chinese import-export management policies, China remains the biggest rubber importer in the world. It leads in importing rubber from Vietnam, consuming some 65 percent of Vietnam’s total exports, of which 58.6 percent are delivered across the border.

Hoa observed that many large-scale enterprises have been trying to seek new export markets to avoid heavy reliance on the Chinese market. It is very difficult for smaller enterprises to expand their export markets. Hoa suggested that the State should set up policies to help enterprises seek new markets and promote trade.

When asked about rubber price prospects, Hoa responded that it is not very likely that prices will rise soon. Harvesting begins in June and will expand the supply, plus demand for rubber will be lower by that time.

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Tags: Vietnam Rubber, Vietnam rubber exports