Rubber industry faces falling prices

Wednesday, Jan 21, 2015 08:15

An employee at Company 74 in the Central Highlands Province of Gia Lai works on a rubber production line. — VNA/VNS Photo Duong Giang

HA NOI (Biz Hub)— The rubber industry is expected to continue struggling this year, with profits declining or even reporting losses, owing to the sharp fall in rubber prices in the world market.

Experts said the sector must reduce exports of raw material and diversify export markets to avoid reliance on a single market to overcome this difficult time.

According to the Viet Nam Rubber Industry Corporation, the rubber industry's profits will narrow as rubber prices in the market are forecast to slip to VND31,000 (US$1.5) per kilogramme this year, while production costs will hover around VND30,000 ($1.4).

The rubber industry of Viet Nam had a hard time last year when prices fell to a five-year low of $1,500 per tonne. The group pointed out that the fall in rubber prices was partly due to China - one of the biggest rubber import markets for Viet Nam - cutting rubber imports at some point of time.

Statistics from the Ministry of Agriculture and Rural Development also showed that Viet Nam exported 1.07 million tonnes of rubber last year, the same as in 2013, but earned only $1.8 billion, 28 per cent lower than 2013's export value, due to the price drop.

The average export price for rubber during the first 11 months of 2014 was $1,695 per tonne, falling by 27 per cent from the same period last year.

Vo Sy Luc, Chairman of the Viet Nam Rubber Industry Corporation was quoted by Thoi Bao Kinh Doanh (The Business Times) as saying that rubber prices had been slipping since 2012 from more than VND100 million ($4,670) per tonne to around VND29 million ($1,355).

This has hit rubber farmers hard, with many in the south-eastern region cutting down their trees to switch to other crops. The total area under rubber tree plantation that was cut down is estimated to be more than 4,000 ha.

According to the group's General Director Tran Ngoc Thuan, Viet Nam currently exports rubber in raw form, mainly latex or rubber with just preliminary processing, which can result in low added value.

Industry insiders estimate that rubber values could increase by up to 20 times if raw materials are processed into finished products.

Doan Xuan Hoa, Deputy Director of the Department of Processing and Trade for Agro-Forestry-Fisheries Products and Salt Production, pointed out that only 18 per cent of the latex from Viet Nam is processed, adding that if the rate is increased to 25 per cent, Viet Nam will become less dependent on foreign markets.

Experts have urged rubber companies to invest more in latex processing to boost added value, warning that the industry will continue to be at a disadvantage in case no improvements are made.

The Minister of Agriculture and Rural Development Cao Duc Phat said that in the long term, the rubber industry must restructure for sustainable development, and focus on enhancing quality and efficiency. — VNS

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