THAILAND: Govt., private sector to boost domestic rubber demand, back processed sector

To promote more local usage and processed-rubber manufacturing, companies have called for the government to provide incentives to encourage domestic production and the usage of natural rubber.

After a meeting with the Federation of Thai Industries (FTI), the Thai Rubber Association and the country's leading rubber manufacturers, Commerce Minister General Chatchai Sarikulya said that besides having measures to help farmers, the government would encourage more rubber production and usage in the domestic market to compensate for risk in export markets.

Private companies will draw up concrete measures to increase domestic usage and processing of natural rubber, so that more value is added to the commodity and the price of Thai rubber is bolstered in the world market, he said.

Companies and the government, meanwhile, believe the global price of rubber has bottomed out and will increase soon, as many measures have been taken to encourage price rises and more demand in the world market.

The Natural Rubber Policy Committee on 16 Oct. 2014 pushed through a Bt58-billion package to help para-rubber farmers suffering from a sharp drop in rubber prices.

Under the populist scheme, each rubber farmer will be given Bt1,000 per rai of land (Bt6,250 per hectare), but no more than Bt15,000. The price of rubber immediately increased by Bt2-Bt3 per kilogram after the announcement of the measure.

FTI vice chairman Chen Namchaisiri said the federation had drawn up a proposal that the government support research and development in the rubber industry from upstream to downstream, as well taking measures to drive export growth.

The private-sector body is calling for the establishment of an R&D centre for processed rubber to enhance usage in the domestic market.

Under the FTI plan, the target is to increase rubber exports to Bt1 trillion by 2020, from the current level of Bt600 billion annually, he said.

Currently, only about 12.5 % of rubber production is processed for domestic usage, with the bulk of output destined for export markets.

Chen said the government should provide a tax incentive for R&D and adapt some conditions under the Board of Investment to support investment in the rubber industry.

If the proposals are supported, domestic demand for natural rubber will increase by at least 100,000 tonnes, he added.

Thailand is the world's largest rubber exporter, with 17.58 million rai (2.813 million hectares) of land under plantation, producing 3.78 million tonnes of rubber last year. The Kingdom shipped 2.98 million tonnes of rubber in 2013.

Luckchai Kittipol, honorary president of the Thai Rubber Association and chief executive of Thai Hua Rubber, said the price of the commodity had bottomed out and should start to rise after the agreement between the government and the private sector to try to boost prices.

He said falling prices had resulted not only from lower worldwide demand and oversupply, but also from lower market sentiment as a result of slower global economic growth.

Luckchai said the price of rubber would, however, start to increase soon as demand in many countries had begun to recover amid recent economic growth.

"Demand for rubber in the world market is expected to increase by 5 % next year, or 600,000 tonnes, from a current total trading volume of 12 million tonnes. The price of rubber should soon increase to nearly Bt60 per kilo," he said.

Moreover, with six rubber-producing countries having agreed not to sell rubber bar for less than USD 1,500 a tonne to the world market, the global price for rubber should rise in the near future, he added.

Chaiyos Sincharoenkul, president of the Thai Rubber Association and executive director of Sri Trang Agro-Industry, called for the government to address the issue of China's decision to reduce its standard for compound-rubber imports, which would present difficulties for Thai rubber production and exports to that market.

China has until now required that compound rubber must comprise 95-% natural rubber, but the new standard will require the level to be only 85 %.

Thai producers would not wish to introduce costly production lines to serve China's changing requirement, while the decision would also lower demand for natural rubber, he said.

The ministry has responded to these concerns and will next month send a mission to Beijing calling for a revision of the new standard, he added.

Source: Daily "The Nation”, Bangkok; 18 Oct 2014
(Syed Rashid Ali, Karachi, Pakistan)