THAILAND: Rising prices, capacity to boost Thai Hua JV with Chinese partner to build tyre plant in Rayong

With prices skyrocketing since late last year, Thai Hua Rubber, the country's leading rubber enterprise, expects its revenue to rise 67 per cent to Bt50 billion this year.

In a press statement, Thai Hua chief executive officer Luckchai Kittipol said the upward trend of rubber prices and the company's capacity expansion would boost revenue growth.

Thailand's cash rubber price soared by about 80 per cent last year and 40 per cent in the first two weeks of this year. The price remained at a record Bt169.30 per kilogram on 20 Jan. 2011, supported by strong demand amid tight supply, according to the Rubber Research Institute of Thailand.

Thai Hua's two new plants in Buri Ram and Phitsanulok will commence operations this year to serve increasing demand in the Northeast and the North respectively. Each has an annual capacity of 60,000 tonnes.

Last year, Thai Hua took over from Sri Thep Thai two factories with an annual production capacity of 20,000 tonnes each. These facilities are expected to make a contribution to the company this year.

"Rising rubber prices have encouraged more farmers to grow rubber. Production in the Northeastern and Northern regions has increased significantly in the past few years," Luckchai said.

"The expansion of new plants will ensure that the company's growth is in line with higher demand and production."

Thai Hua now has a combined annual production capacity for latex, rubber sheet and rubber block of 380,000 tonnes, with about 300,000 tonnes of the total for export markets.

Meanwhile, in a move into the downstream industry, Thai Hua has joined hands with China's largest tyre producer, Hangzhou Zhongce Rubber, to establish a 200 to 300 rai (32 to 48 hectare) plant in Rayong.

Thai Hua holds a 15 percent stake in the joint venture, which recently gained Board of Investment privileges, with the Chinese firm owning the remainder.

The Bt 5 billion factory, the first investment by Hangzhou Zhongce outside China, is expected to com?mence production early next year. With an annual capacity of 5 mil?lion tyres, most of the output will be exported to the United States, Europe and Asean countries.

"What we are doing is to ensure that about 30,000 tonnes of latex is supplied to the plant," Luckchai said.

Hangzhou Zhongce Rubber is China's largest and the world's 12th biggest manufacturer of tyres. It uses about 300,000 tonnes of latex for its production of more than 30 million tyres a year.

The joint venture, which is expected to have a workforce of 3,000 to 4,000, will give Thai Hua knowhow and help it move into the downstream industry. It has been situated in the upstream industry for more than 30 years.

"Thailand will become the centre for China's tyre production for other markets after the Asean Free Trade Agreement and export privileges for the US and the European Union. So China will be able to avoid anti dumping duties," Luckchai said.

China sees Thailand's potential to become the centre of Asean trade, he said, adding that the Kingdom could provide not only infrastructure support, but also human resources and a link to other Asean nations.

In addition, Thai Hua expects its 200,000 rai contract farming deals covering five provinces in Laos to provide production for the company by 2013.

With an investment of more than Bt1 billion since 2006, the company anticipates that its expansion into Laos and other neighbouring countries will ensure sustainable growth, the CEO said.(Syed Rashid Ali, Karchi, Pakistan)