Written on 04.04.2014 - Industry
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VIETNAM: Global excess hits rubber exports

For the third consecutive year, local rubber enterprises have suffered losses because of limited exported markets and abundant supply on the market. According to the Viet Nam Rubber Association (VRA), by the end of February, Viet Nam had exported over 100,000 tonnes of rubber, earning USD 220 million, a drop of 23 % in quantity and 42 % in value compared with the same period last year.

China and Malaysia are two major markets for rubber export but this year, they cut their purchases, causing prices to fall.

This year, Viet Nam exported 41,657 tonnes of rubber, a drop of 40.7 %, to China, and 16,985 tonnes, with a drop of 28.6 %, to Malaysia.

The current price for rubber exports is about USD 2,000 per tonne, a fall of USD 300 in comparison with 2012 and a drop of USD 800 compared to 2011.

Last year, over 1.1 million tonnes were exported at a cost of over USD 2.5 billion, an increase of 5 % in quantity but under 12 % in value.

VRA had expected the price of rubber to go up in 2014 to USD 2,500 per tonne.

Meanwhile, the global market will have over 353,000 tonnes of surplus, according to the RCMA Commodities Asia Pte.

This is the third consecutive year that the global rubber market has faced an oversupply of rubber, with an increase of more 16 %, up to 2.5 million tonnes, compared to the same period last year.

In addition, the Viet Nam Rubber Group (VRG) said that most rubber companies in the Central Highlands provinces depended on the Chinese or local market.

A huge quantity of rubber has been exported through border gates in Lao Cai or Ha Giang provinces between Viet Nam and China.

"When there is less rubber crossing border gates, Chinese traders often offer a high price but when it increases, they will pay a lower price, causing high risk for companies," a staff member of VRG said.

To reduce risks, the general director of VRG Tran Ngoc Thuan has asked all Central Highland and central provinces' rubber companies to only transport rubber to Hai Phong after clients have made a reasonable deposit and to look for more markets other than China.

"Increasing the quality of product is the only way to allow rubber companies survive because only a good brandname company will be able to sign contracts," Vo Sy Luc, chairman of VRG management board, was quoted as saying in the Sai Gon Giai Phong (Liberated Sai Gon) newspaper.

Each company should have short-term product and market strategy and prepare for a long-term one, he added.

VRA also predicts that in the next few years, supply will increase; therefore, the quality of product and a diversified market will be vital factors.

Source: Daily "Vietnam News", Hanoi; 29 Mar 2014
(Syed Rashid Ali, Karachi, Pakistan)