Malaysia’s Rubber Product Exports To Hit RM14.4 Billion In 2011

Malaysia’s Rubber Product Exports To Hit RM14.4 Billion In 2011
July 26, 2011





KUALA LUMPUR, July 26 (Bernama) — Malaysia’s exports of rubber products are likely to increase by about 11 per cent or RM2 billion to RM14.4 billion this year from RM12.96 billion in 2010 due to higher prices and output.

Deputy Plantation Industries and Commodities Minister Datuk G. Palanivel said production for the first six months of 2011 rose to 480,000 tonnes from 450,000 tonnes during the same period last year.

”It is estimated that by 2020, the export revenue derived from the integrated rubber industry will reach more than RM98 billion,” he told reporters after launching the International Rubber Economic Conference 2011 here Tuesday.

He said export earnings had increased by 36 per cent to RM34 billion in 2010 from RM25 billion in 2009 due to continued firm regional demand and stronger natural rubber prices.

Present at the press conference were Malaysian Rubber Board (MRB) Chairman Datuk Wira Ahmad Hamzah and Director-General Datuk Dr Salmiah Ahmad.

Palanivel said demand for natural rubber was estimated to grow at a modest pace this year at 3.8 per cent to 11.149 million tonnes due to anticipation of slower growth of the global economy.

He said under the National Key Economic Area (NKEA), it was projected that the Malaysian rubber industry would contribute RM52.9 billion to Gross National Income by 2020 compared to RM20 billion last year.

To meet the strong demand for the commodity, Palanivel said the government wanted to increase the rubber yield per hectare with research and development via MRB.

Under the NKEA, he said, four entry points projects had been identified for implementation which include maintaining the rubber tappable area of one million hectares while increasing yield improvement to two tonnes per hectare by 2020.

Meanwhile, Dr Salmiah said rubber prices should stabilise around RM13.50 per kg.





Gaining traction: Rising rubber costs give used-tire market a boost in popularity
July 26, 2011



Rising rubber costs have set the used-tire market rolling.

As the price of new tires has risen alongside increasing material costs, used-tire retailers have gained popularity among customers not ready to drop hundreds of dollars on a new set of wheels.

“Especially in a bad economy, it kind of makes sense,” said Dan Zielinski, a spokesman for the Washington-based Rubber Manufacturers Association. “A new set of tires is going to cost you several hundred dollars; there’s no two ways about it. I don’t think anyone enjoys the process of sinking a lot of money into their car.”

High tire prices reflect the fact that natural rubber, petroleum and energy, the primary components of tires, have all spiked over the last few years, Kevin Rohlwing, senior vice president of training at the Tire Industry Association in Bowie, Md., said in a Monday email.

Natural rubber, which went for 75 cents a pound in 2009, soared to nearly $3 a pound last year, Rohlwing said. It has since fallen back to $2.28 a pound.

Used tires are still a relatively small slice of the overall tire market. About 33 million used tires were in the market in 2009, according to the latest figures available from the Rubber Manufacturers Association, compared with about 220 million replacement tires sold new.





Tokyo futures slip as US debt deadlock continues (July 26)
July 26, 2011





TOKYO, July 26 (Reuters) – Key Tokyo rubber futures fell on Tuesday, pulled down by the yen’s strength against the dollar and lower oil prices, while the U.S. debt crisis kept investors wary about risky assets and the global economy.

FUNDAMENTALS

* The key Tokyo Commodity Exchange rubber contract for January delivery <0#2JRU:>, which debuted on Tuesday, traded at 381.5 yen per kg as of 0020 GMT, after opening at 383.8 yen.

* The previous benchmark, for delivery in December, was down 2.3 yen at 379.6 yen.

* The most active Shanghai rubber contract for January delivery closed on Monday at 35,690 yuan ($5,537) per tonne, down from Friday’s 36,110 yuan. Volume fell to 584,164 lots from Friday’s 708,164 lots.

* The U.S. dollar slightly recovered after falling as low as 78.055 yen, its weakest since mid-March. The U.S. unit remained on the defensive in early Asia-Pacific having hit record lows on the safe-haven Swiss franc as the market awaited the latest attempt by President Barack Obama to break the deadlock on debt talks.

* U.S. crude futures fell below $99 a barrel on Tuesday as investors avoided riskier assets due to U.S. lawmakers’ deadlock over duelling debt plans, raising the risk of a credit ratings downgrade and national default.

* For the top stories in the rubber market and other news, click , or

MARKET NEWS

* Japan’s benchmark Nikkei average opened up 0.3 percent at 10,078.48 on Tuesday. The market is expected to trade narrowly, with positive earning results from Canon and other firms likely to lend support but concerns about the U.S. deadlock seen sapping trading appetite.

* Nissan Motor Co plans to double automobile production in China, its biggest market, to more than 2 million units a year by the end of 2015 as it shifts its focus to emerging countries, Japanese business daily Nikkei reported.

* Strong U.S. sales for Chrysler and growth in Brazil will help offset a weak European market for Fiat SpA , combined financial results are set to show on Tuesday as the two car makers move closer towards a full merger.

DATA EVENTS

* The following data is expected on Tuesday: – 1145 U.S. ICSC chain stores yy Weekly – 1300 U.S. CaseShiller 20 mm nsa May – 1300 U.S. CaseShiller 20 yy May – 1400 U.S. New home sales chg mm Jun – 1400 U.S. New home sales-units mm Jun – 1400 U.S. Consumer confidence Jul – 2030 U.S. API weekly crude stocks Jul 22 – 2030 U.S. API weekly dist. stocks Jul 22 – 2030 U.S. API weekly gasoline stk Jul 22 – 2300 S.Korea GDP growth yy Advance Apr 2011.




Sri Lanka expands acreage under rubber
July 26, 2011



Natural rubber is facing a bright future with the price of petroleum-based synthetic rubberincreasing rapidly. Therefore Sri Lanka would expand its acreage under rubber by planting 5,000 hectares in Monaragala,

Plantation Industries Minister Mahinder Samarasinghe announced recently.

Addressing the 92nd Annual General Meeting of the Colombo Rubber Traders’ Association as the chief guest the minister said it would increase to 10,000 hectares as the demand grew for natural rubber.

He said plantation trials were also being conducted by the Rubber Research Institute in the Jaffna district and other northern areas.

Minister Samarasinghe said the present estate management lease agreement would lapse in 35 years and he posed an open ended question; would it be that the plantations would revert to the people of this country or continue to be sustained in its present form? He brought to bear the intensity of small holders who had contributed significantly circumventing all odds and they were significant partners in the progress of the sector.

Exports of value added products are now in the region of 63 million SLR (US$576,000), and growing with 2010 being a record year.

He said 1.5 billion SLR was cost of fertilizer for totality of rubber holdings. It was therefore imperative that simultaneous increase of production was essential if the rubber industry was to progress.

The subsidy was increased and plantation companies too were subsidized for use of panel guards to intensify increased production.

Colombo Rubber Traders’ Association Chairman M.S.Rahim said that planters and regional plantation companies had to be credited with high standards they maintained.

He said product standards plus their sustained production drive had sequentially resulted in Rubber being an important plantation crop which had proved its worth and its impact on the economy. Production had increased 12%, but the small holder sector, of about 125,000 cultivators contributed substantially to boost production levels which were about 153,000 tonnes annually.

Latex crepe contributed to natural rubber exports, but value added products gaining in exports had also contributed to plus factors to enhance importance of rubber contributing to export inventories surpassing all past records. Rahim said in summing up 2010 as a good year.





Safeguard duty on key cemical to impact rubber industry
July 26, 2011





NEW DELHI: Margins oftyre and rubber industry will take a hit after India has deciding to impose steep safeguard duties on a key chemical used in processing despite protests from the European Union and the US. Thesafeguard duty on the chemical (PX-13 ) is aimed at protecting the domestic industry against a surge in imports causing losses. It will be levied at 30% of the imported value in the first year and 25% in the second year, as per a notification. India is largest producer of the chemical.

“The decision to impose safeguard duty was taken as there has been a significant increase in imports despite imposition of anti-dumping duties ,” a government official told ET. The landed price of imports is lower than cost of production and selling price of domestic industry resulting in price suppression,” he added. Certain companies from the EU and China, which have already been penalised with anti-dumping duties for selling in India at prices lower than that prevailing in their domestic markets, will have to pay the difference between the two levies, a government official explained.

NOCIL, in its complaint filed to the director general of safeguards, had stated that given the surge in imports , the domestic industry may not find market for additional capacities that are coming up. DG safeguards conducts safeguard investigations and recommends duties which is ultimately notified by the finance ministry. The user industry, which includes tyre manufacturers like JK Industries ,CEAT,Apollo Tyres, Birla Tyre,MRF and Metro tyres, would now have to pay a higher import duty on the chemical.

The Automotive Tyre Manufactuer’s Association is apprehensive that the duty may affect input prices in the future . “Once the domestic industry builds the additional capacity, the user industry will entirely be at the mercy of domestic producers which will make the Indian tyre industry uncompetitive ,” the association said in a representation to DG safeguards.






Import of natural rubber only option in near term
July 26, 2011



The raw material component of tyre industry estimated to be around R30,000 crore accounts for 70% of total cost of production. The industry has been pleading for increasing the availability of natural rubber, the key raw material, in the country to meet the rising demand and has recently contemplating acquiring rubber plantations abroad. Neeraj Kanwar Chairman, Automotive Tyre Manufacturers Association (ATMA) spoke to FE’s Sandip Das on various issues impacting the industry.

Why is the tyre industry looking for rubber plantations abroad when India is amongst the leading rubber producers in the world?

About three years ago, natural rubber production and consumption were matching. India has been the fourth largest producer and consumer of natural rubber in the world. Over the last three years, however, the consumption has grown at a much faster pace than production.

While India continues to be the fourth largest producer of rubber, it ranks second in consumption just after China. Growth in automobile sector and better road infrastructure has led to an exponential rise in demand for tyres which in turn has heightened the need for natural rubber by the industry.

However, the domestic demand-supply gap in natural rubber is widening. As a long-term measure, therefore, the industry is looking for acquiring rubber plantations abroad to secure future raw material needs like China.

While the plantations are a long term measure, what are the short term options for the industry?

The industry has been importing natural rubber to bridge the deficit between production and consumption as a short-term measure. While imports are inevitable, they represent an expensive option. A hefty 20% duty was imposed on import of natural rubber.

From 1st April, the Government has put a cap of R20 per kg of import which is a relief but domestic production being inadequate, we have asked for duty free import of rubber to the extent of domestic deficit which in the current year is likely to be in the range of 2 lakh tonne.

What are the implications if natural rubber import issue is not addressed urgently?

We consider rubber growers as a vital link in the value chain. But the current business realities call for a relook at the production and consumption imperatives.

In the last four years, natural rubber production has increased by only 1%.

On the other hand, its consumption has increased by around 16% leading to a wide gap. While plantations abroad will help bridge the gap as a long term measure, import is the only option in the near term.

However, costly imports will make the industry uncompetitive and the import of finished products especially tyres will take place denying value addition within the country.

Duty free import to the extent of domestic deficit should be seen in this backdrop.

The imports should not be seen as a dampener for domestic prices since it has been seen that in the years when maximum imports have happened, the domestic prices have also ruled higher.

People say that harping on raw material issue is only a ploy to increase prices. What are your views on this?

If you look at the average price of natural rubber in 2009-10 and 2010-11, there has been an increase of more than 100%. The prices of synthetic rubbers like PBR and SBR also have gone up in similar proportions.

In fact, in view of competition, the industry has not been able to pass on the increased cost of production to the consumers leading to a tight squeeze on profitability.

The ratio of net profit to net sales for the industry which was around 8% in 2009-10 has dwindled to less than 3% in 2010-11.

If the partial increase in cost of raw materials is not passed on to the consumers, the industry will be in losses.

Industry has already lined up investment programme of R15000 crore over the next 3-4 years to serve the rising demand from a growing economy.