MALAYSIA: Smallholders gain but processors suffer from higher rubber prices

While the record high rubber prices augur well for smallholders, local rubber manufacturers and processors are pressured by the increasing cost of natural rubber (NR), said Plantation Industries and Commodities Minister Tan Sri Bernard Dompok.

To minimise the impact of high cost of raw material on downstream operators, he said the Government would be looking at several steps to help stabilise rubber prices.

Tyre-grade SMR 20 is currently traded at about RM15.76 per kg while Latex-in-Bulk about RM10 per kg.

Dompok was speaking to reporters after chairing a dialogue session between the ministry officials, Malaysian Rubber Board and other rubber industry representatives on 13 Jan. 2011.

He said Malaysia would still need to import its NR supply from major producers like Thailand and Indonesia to support its thriving rubber downstream sector.

However, Malaysia would continue to maintain its rubber area at one million ha while focusing, among others, at increasing its national average rubber productivity and sustainability of the upstream sector.

Earlier, during the dialogue session, the government rubber agencies and industry representatives were briefed on the performance of the rubber industry in 2010 and given an overview of NR prices.

Issues on the higher operating capital for rubber processors and product manufacturers were also discussed at length.

For rubber processors, high rubber prices have impacted the factories as the much higher operating capital had also increased interest charges in terms of sourcing of cup lumps as well as in financing the required stocks in the factory.

Some processers encounter problems in securing bank financing. There have also been incidents of significant financial losses among processors.

As for rubber product manufacturers, many were also struggling from the higher cost of production, said Malaysian Rubber Glove Manufacturers Association president K.M. Lee. He told local press reporters on the sidelines after the dialogue session that a stronger ringgit made rubber gloves, mostly sold in US dollar, more expensive while the upward trend of latex concentrates would further erode rubber glove makers' margin.(Syed Rashid Ali, Karachi, Pakistan)