MALAYSIA: Sime Darby to expand rubber plantation despite weak price

Malaysian conglomerate Sime Darby plans to further expand its rubber plantation despite weak price of the commodity, a senior company executive said.

Sime Darby currently owns about 9 000 hectares of rubber plantations, or less than 2 % of its total land bank, and the company is seeking to raise the holding to 10 % within the next five years, said its head of plantations Franki Anthony Dass. "We will continue to look into rubber in Liberia because the need for natural rubber will pick up together with the population boom," he said, noting potential in the automotive industry that has yet to take off in Africa.

Limited availability of suitable land in Indonesia and Malaysia have been driving Asian planters such as Sime Darby and Golden Agri to Liberia. In 2009, Sime Darby had signed a 63-year concession pact with the Liberian government to develop 220,000 hectares into palm oil and rubber plantations.

Dass' comments come at a time when natural rubber prices have remained weak amid a supply glut. Prices of natural rubber have hovered between USD 1.20 and USD 1.30 a kilogram for the past two months after declining more than 25 % so far this year. That has forced many rubber growers to abandon their plantations as continued operations could result in losses, the Association of Natural Rubber Producing Countries said.

Members of the ANRPC have been grappling with six-year low prices due to oversupply of the commodity used in everything from medical gloves to tires. Global output could fall 0.1 % this year at 10.94 Mio. t, ANRPC's forecast showed, helping to cut stockpile at a time of sluggish demand. Up to October this year, rubber production totalled 8.99 Mio. t.

In the near term though, rubber prices are expected to "hover within a tight range," said the Malaysian Rubber Board. "The market is still weak due to the lack of buying interest and the demand is not expected to improve in the near-term."

Source: Nikkei Asian Review”, Tokyo; 23 Nov 2015
(Syed Rashid Ali, Karachi, Pakistan)