Vietnamese exporters meet troubles in selling rubber to China

For the last two weeks, Vietnamese rubber exporters cannot sell any kilos of rubber latex to China through the cross-border market.

Le Van Xuong, Chief Representative of the Quang Ninh-based Binh Long MTV Rubber Company, confirmed that the rubber trade activities between Chinese businessmen and Vietnamese enterprises remained frozen.

Chinese stop purchases to force prices down

The first signals of the exports slowdown appeared in early July 2011. At that time, instead of carrying trade activities every day, Chinese businessmen unexpectedly did not make transactions some days. And they have stopped purchasing rubber from Vietnam over the last two weeks.

According to Xuong, on the other side of the Luc Lam border gate, Chinese customs inspectors and policemen take inspection tours every day. Since Chinese authorities do not allow to clear rubber imports, Chinese businessmen do not purchase rubber latex from Vietnam any more.

According to Tran Thi Thuy Hoa, Secretary General of the Vietnam Rubber Association, the fact that Chinese authorities have been strengthening the measures to control rubber imports from Vietnam across the border since early July 2011, is not a surprise at all.

She said that this policy has been regularly applied by the Chinese authorities to control the business of Chinese businessmen at the border gates. Besides, the policy also aims to ease the latex rubber prices which have been escalating steadily since the beginning of the year.

“When the government opens the cross-border trade, Chinese businessmen would rush to purchase rubber latex, which would certainly lead to the price increases,” Hoa explained.

“In order to force the prices down, the best solution is to cut down the purchases. Once the demand decreases, exporters will have to cut down the prices,” she added. The measures of intensifying inspections and limiting imports being taken by Chinese customs agencies prove to have brought the desired effects.

The import control policy has immediately influenced the rubber latex price which has dropped from 31,500 yuan in mid August to below 29,000 yuan in early September.

“I think that the prices would decrease further,” Xuong said.

Vietnamese enterprises on the “knife edge”

While customs agencies harshly inspect the imports at border gates, Chinese commercial banks all have tightened payment methods and limited the granting of bills of exchange to the rubber trade agreements.

Ha Van Chay, the market analyst of the Vietnam Rubber Group, said that since Chinese importers cannot get bills of exchange, they have canceled the plans to import rubber. As a result, Vietnam’s rubber exports have been unsold, which has led to the sharp falls of the rubber prices.

Chay said that it is now the high rubber latex harvesting season, therefore, Vietnamese exporters are facing big difficulties as they cannot sell products. “They have to keep rubber in stocks, while the input costs keep increasing and bank loan interest rates are high,” he said.

For the last many years, Vietnamese enterprises always fall into distress any time when Chinese authorities apply the measures to control rubber imports, because China consumes 60-65 percent of Vietnam’s total rubber exports.

According to the Vietnam Rubber Association, in the first eight months of 2011, Vietnam exported 449,000 tons or rubber, earning 1.9 billion dollars in revenue, of which 60 percent came from Chinese market.

In fact, Vietnamese enterprises have many times tasted the bitterness of the Chinese market. They have also been many times advised to shift to export rubber through the official channel instead of cross-border channel. However, the export volume through official channels has not increased significantly, because Chinese businessmen have to bear the high tax rate of 25 percent (the tax rate of zero percent is being applied to cross-border trade). Besides, involved parties still prefer cross-border trade thanks to the simple procedures.

Source: SGTT

Tags: Vietnam Rubber, Vietnam rubber exports