VIETNAM: Short supply to benefit rubber industry

The national rubber industry is upbeat about export prospects in coming years, but experts are calling for a strategy to reduce over-reliance on a single market in the long run.

The Vietnam Rubber Association (VRA) said total export turnover last year reached 2.3 billion US dollars, surpassing the set target by 800 million US dollars.

Although rubber exports last year increased by only 5.7 percent in volume, reaching 750,000 tonnes, it rose by roughly 90 percent in value, according to the Ministry of Agriculture and Rural Development.

The country's total rubber output this year is estimated to reach about 780,000 tonnes, an increase of 30,000 tonnes over 2010, for a turnover of between 2.5 and 2.7 billion US dollars.

Last year saw latex prices soar dramatically, reaching 2,820 USD per tonne, a 230 percent surge over 2009. The hike in export prices benefited many local rubber exporters, the VRA said.

The Tay Ninh Rubber Company, for instance, earned revenues of over 806 billion VND (40.3 million USD), with pre-tax profits of 292 billion VND (14.6 million USD), surpassing its target by 152 percent.

Meanwhile, the Phuoc Hoa Rubber Company posted revenues of nearly 2 trillion VND (99.1 million USD), 90 percent more than its annual target; and a 75 percent increase in post-tax profits at 471 billion VND (23.5 million USD).

Experts attribute the increasing demand for rubber and higher prices to the global economic recovery, which has manufacturers of many products including tyres buying more of the raw material.

However, experts say that the supply of rubber will fall short of demand until at least the end of February this year since many large plantations in Thailand, Indonesia and Vietnam are now in their low production season.

Current reserves maintained by China, a major consumer, are estimated at only 58,675 tonnes, a drop of 55 percent compared to the same period last year.

China is Vietnam 's leading importer of latex, accounting for 70 percent of its rubber export revenues.

But rubber exports are overly reliant now on China's import policies because large quantities are exported to the neighbouring country via border-trade or unofficial channels, said Tran Thi Thuy Hoa, general secretary of the VRA.

Hoa urged rubber businesses to increase the product quality and look for more markets instead of depending too much on the Chinese market.

Businesses should also export rubber to China via official channels, he said.

Of the total rubber cultivation area of 678,000 ha, 65 percent has given latex so far, according to the VRA.

The high economic value of latex has attracted investments from many businesses in many localities.

The Sai Gon Construction Trading Company has developed a project to cultivate rubber on 20,000ha in central Quang Tri province's Huong Hoa district. It aims to plant the trees on 1,500ha within this year.

The central province of Quang Binh has 13,000ha under rubber cultivation and plans to increase the figure to 26,000ha by 2015.

Experts have said that the expected increase in rubber output until 2020 would still be insufficient to meet demand, and the industry is expected to post higher earnings as a result.

Vietnam, Thailand and Indonesia are among the major suppliers of latex to the international market.(Syed Rashid Ali, Karachi, Pakistan)