Rubber market: high demand, low supply

The increasing demand for rubber unceasingly pushed up the price for this product making it reach US$4,100 per tonne in April 2010, the highest price over the past 10 years

The increasing demand for rubber unceasingly pushed up the price for this product making it reach US$4,100 per tonne in April 2010, the highest price over the past 10 years. Increases in rubber prices are an opportunity for Vietnamese businesses to earn a higher profit from rubber exports.

Supply down, demand up, price setting new record

Vietnam ranks fifth and fourth among countries/territories worldwide in terms of rubber cultivation area and natural rubber export, respectively. Vietnam sells rubber to 39 countries all over the world, with sales to China accounting for 60% of the total. The rubber price reached its peak of US$4,100 per tonne in April 2010 and then decreased to US$3,700/tonne in October 2010 and has now increased again to reach US$4,050/tonne.

In the first 10 months of this year, Vietnam exported about 590,000 tonnes of rubber latex worth US$1.67 billion and is expected to export an additional 150,000 tonnes in the last two months of the year to take the total export revenue of the year to US$2.1 billion, the highest annual rubber export revenue so far.

Vietnam Rubber Group general director Tran Ngoc Thuan said the fact that rubber supplies have decreased while the global economy is recovering has caused the rubber demand to increase remarkably. About 10.43 million tonnes of natural rubber is expected to be consumed in 2010, eight% more than last year. Currently, 94% of all natural rubber in the world comes from Asia, while Thailand has become the biggest natural rubber supplier in Asia and it is followed by Indonesia, Malaysia, India, Vietnam and China.

Other factors, which contributed to pushing up the rubber price, include floods in Thailand, long, heavy rains in Malaysia in October and the volcano spray out in Indonesia that all deterred rubber latex extraction and transportation, Thuan said. Meanwhile, the global economy’s recovery has caused automobile and auto tire production to increase considerably not only in China but also in many other major markets such as India, the US and Japan, he said. Besides, speculators’ involvement contributed to pushing up the rubber price.

Opportunities for the rubber industry

Vietnamese rubber businesses began expanding their rubber cultivation areas because rubber is planed as a multi-target crop: 1) A crop catering for the re-afforestation program, a plant serving the poverty reduction objective and a plant contributing to rural area modernization. Apart from areas specializing in rubber plantation in the southern country, more rubber trees are being grown in central coastal and northwestern regions. The Vietnamese rubber industry is expected to increase its rubber cultivation area to 800,000 hectares in 2015 and reach a rubber production output of 1.2 million tonnes in 2020.

Thuan said that the Vietnam Rubber Group has a rubber cultivation area of 270,000ha, accounting for more than 40% of the country’s total, while the group’s rubber exports account for 85% of the country’s total. The Vietnam Rubber Group is realizing its plans to grow rubber for both latex extraction and timber exploitation and expand rubber cultivation areas in northwestern, northern central and southern central regions and highland border areas. Besides, the group is seeking rubber varieties that are suitable to specific regions while developing rubber cultivation through joint ventures and or joint stock companies with local inhabitants. Plans are being drafted to expand rubber cultivation to industrial zones in Binh Phuoc, Dong Nai, Tay Ninh and Ba Ria-Vung Tau provinces and invest in rubber cultivation in Laos, Cambodia, Myanmar and South Africa where rubber latex quality and production output are high (the rubber latex yield in these countries is about two tonnes per hectare per year).

Apart from extracting and exporting natural rubber latex, the Vietnamese rubber industry makes tires, inner tubes and other products from rubber. Southern Rubber Industry Joint Stock Company (CASUMINA) deputy general director Nguyen Van Tri said that the Vietnamese rubber tire market is expected to develop in the coming time because the US and Japan are decreasing their rubber tire production due to increases in rubber prices. This is an opportunity for Vietnamese rubber businesses to develop export production.- VNS

Tags: Vietnam Rubber, Vietnam rubber sector