Indonesia's challenge to
Thai dominance
in world rubber production
By Jon Fernquest |
Today's Bangkok Post business section features two Reuters articles on the Thai rubber industry which is currently plagued by bad weather, labour shortages, and the southern insurgency.
Thailand is the world's largest rubber producer and exports mainly to China, the world's largest consumer of rubber.
Thailand is slowly falling behind its Southeast Asian neighbor Indonesia in rubber production:
"Indonesia would overtake Thailand as the world's biggest rubber producer in 2015, five years earlier than expected, due to higher productivity and new plantations, a senior Indonesian industry official said."Indonesia's production will surpass that of Thailand in 2015 because of better production growth," Suharto Honggokusumo, executive director of Indonesia Rubber Association, told Reuters on the sidelines of an industry gathering late on Friday.
"Growth in Indonesia will be an average of 5 to 6% a year starting from 2008. Production will reach 3.8 million tonnes in 2015. Thailand's growth is estimated at only 2 to 3% in average. Production will reach 3.75 million tonnes in 2015," he said.
"Indonesia produced nearly 2.8 million tonnes of rubber in 2007 and is on track to boost production because of higher productivity, better prices and steady demand for the commodity used in tyres, gloves and condoms," Honggokusumo said.
"Productivity was very low at below 700 kg per hectare per year before 2002. It went up to 979 in 2007.
Indonesia won't be overtaking Thailand in rubber production any time soon though:
"Indonesia has been expected to overtake Thailand as the world's biggest natural rubber producer in 2020 by nearly doubling its natural rubber output to 4.12 million tonnes."
Although Thai rubber production has grown over the last decade, factors such as bad weather, the insurgency in the south, and labour shortages have plagued Thai rubber industry recently:
Rubber acreage expanded by 26% between 1997 and 2006. The country has also opened new plantations, mostly in the Northeast, which are expected to start production in a few years."We have areas increasing in the Northeast and the East but in the South, they are decreasing year by year because of a shortage of labour," said Mr Luckchai.
Some farmers have also shifted to growing palm oil, for which prices have soared above $1,000 a tonne, but new plantations were likely to prevent rubber output from falling, he said.
...Thailand's rubber production has been hit by erratic weather (heavy rains and dry spells), labour shortages and separatist violence in the three provinces in the south, which produce nearly 10% of the 3 million tonnes of the country's annual output."
Higher prices worldwide are spurring expansion in rubber production:
"Global demand is good, that's why the price is also good. Farmers are still happy to take care of their plantations."Indonesia, which churned out around 2.6 million tonnes of rubber in 2006, is replanting 250,000 hectares (617,800 acres) of old smallholders' rubber plantations and will add 50,000 hectares of new smallholders plantation per year until 2010.
International prices have rebounded sharply since hitting 30-year lows in 2001 after main producers Thailand, Indonesia and Malaysia decided to curb output to push up prices.
Indonesia's tyre grade SIR20 was quoted at $1.22 per pound on Friday, up nearly 8% since the start of 2008."
Indonesia's rubber exports, mainly to the United States, Japan and China, were estimated at 2.4 million tonnes in 2007
Global rubber consumption is forecast to grow 2.7% this year after rising 5.7% in 2007 - the fastest in three years on growing demand in key markets, the International Rubber Study Group earlier this month. Global synthetic rubber consumption was estimated to have risen by 6% to 13.19 million tonnes in 2007, while natural rubber consumption rose by 5.4% to 9.71 million tonnes."
To learn more about the global market for another essential commodity, steel, read a detailed article on the rapid expansion of Mittal Steel in this week's Economist. [Link to article]
(Source: Bangkok Post, business section, 19-02-08)
Vocabulary:
Y plagued by X, X plagued Y - X was a severe problem that made doing Y difficult
an insurgency - a violent opposition to the government of a country
X falling behind Y - Y is increasing faster than X
X overtakes Y - X is catching up with and will likely pass Y in the future
plantations - a farm with large amounts of land, usually in a tropical country, growing crops such as rubber, coffee, tea, or sugar
surpass Y - go beyond Y
on the sidelines of - not part of the main events0
an industry gathering - when company executives and managers get together to discuss the current situation and make plans for the future
erratic - does not follow a regular pattern, move in unexpected ways
dry spells - periods of time with no rain and no water
separatist - part of a group planning to overthrow the existing government in a region of a country and form their own government
spurring Y - makes Y happen faster and sooner
churned out - produce large quantities quickly
a smallholder rubber plantations - a small farm that grows runner trees (a "plantation" usually means a very large farm with many poor employees in most peoples' mind)
prices have rebounded sharply - prices were low but then jumped back up quickly
curb output - reduce or halt output
tyre grade SIR20 - rubber of the right quality to make tires with
rubber - a material that can undergo elastic deformation under stress and return to its previous size without permanent deformation
natural rubber - (See Wikipedia on rubber)
synthetic rubber - a substitute for natural rubber with improved material properties, close to 21 million tons of rubber were produced in 2005 of which around 58% was synthetic (See Wikipedia)
