Vietnam’s rubber group boosts overseas investment

Vietnam Rubber Group (VRG) is planning to boost overseas investment this year to develop 100,000 hectares of rubber in Cambodia, Laos and Myanmar in 2012.

The next target of the group is South Africa, said VRG general director Le Quang Thung at the review meeting of the local rubber industry in HCMC last Friday.

The group has signed deals to lease land at US$7 per hectare each year and develop around 10,000 hectares in Cambodia over the next 70 years. The State enterprise has also grown over 21,000 hectares in Laos at the rent of US$30-50 per hectare and will negotiate to lease land in Myanmar.

Besides low rent, rubber cultivation in these countries can turn out two tons of latex per hectare, equivalent to the output in southern Vietnam, Thung explained. Meanwhile, the company has found it hard to expand rubber projects in the Central and Central Highlands due to land procedures.

This year, VRG expects to need VND10 trillion to expand rubber cultivation areas and invest in wood factories, hydropower plants and real estate projects. The group will cover 50% of the sum and mobilize the rest from equitization of its subsidiaries.

Vietnam, Thailand, Indonesia and Malaysia, which are key rubber exporting nations in Southeast Asia, export around 1.3 million tons per year. When world rubber prices fall, these countries will cut exports and purchase raw rubber on the market.

VRG has 27 subsidiaries that are managing over 155,000 hectares with total latex output of 330,000 tons per year. One of its affiliates, Quang Ngai Rubber Co., also plans to grow another 600 hectares this year after rubber cultivation areas in the central province were destroyed by Typhoon Ketsana last year.

* When rubber-growing firms and farmers are upbeat after the recent price hike, domestic rubber processors are struggling to escape the supply shortage nightmare.

Vietnam National Chemical Group (Vinachem), the biggest tube and tire producer in Vietnam, is concerned about the shortage as it cannot sign new deals with rubber-growing companies under Vietnam Rubber Group (VRG).

Vinachem’s subsidiary, Danang Rubber Co., has clinched deals with VRG affiliates for 4,000 tons of natural rubber, only one-third of its demand. The demand gap will surely be filled by other suppliers, meaning that rubber quality will be a thorny question.

The company will be in more trouble once the first phase of its radial tire plant with annual capacity of 600,000 tires is operational next year, doubling its rubber demand.

Vinachem, a member of the Vietnam Rubber Association, has annual capacity of 20 million, ten million and two million bike, motorbike and car tires respectively.

When rubber prices go up rubber producers would rather export their products than sell them to Vinachem.

They explain that foreign buyers pay less attention to quality when signing deals for large volumes, and they can then earn more with the refund of the value-added tax.

The opposite thing happens when they sell to Vinachem and its subsidiaries.

VietNamNet/SGT

Tags: Vietnam Rubber, Vietnam rubber group