RUBBER NEWS INT'L: Natural rubber industry still lacking in sustainability: WWF (Last Updated: 17 Dec 2021)
Natural rubber industry still lacking in sustainability: WWF
Published on: Thursday, December 16, 2021
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Rubber industry is dominated by smallholders.
PETALING JAYA: The natural rubber business in Malaysia still lacks sustainability and traceability, according to two World Wide Fund for Nature-Malaysia (WWF-Malaysia) assessments issued Tuesday.
The studies “Mapping the Natural Rubber Value Chain in Malaysia” and “Addendum Report on Rubberwood” discovered that the problem with the natural rubber supply chain is due to the industrial system’s systemic architecture.
The WWF-Malaysia in statement, here, Tuesday, said Malaysia is the world’s seventh largest producer of natural rubber and the eighth largest consumer. Tyres, industrial customized rubber products, and consumables such as gloves and shoes are all examples of rubber products utilised in Malaysia.
Because most Malaysian-grown natural rubber is used in tyres, Malaysia is a significant importer of natural rubber from Thailand. The rubber industry is Malaysia’s second largest agricultural sector, behind oil palm, and has a substantial environmental impact.
In Malaysia, over 90 to 95 percent of rubberwood is used in the furniture industry. In recent years, this segment has accounted for 70 to 75 percent of the rubberwood sector’s RM8 to RM9 billion in annual export value.
Rubber production is mainly by smallholders (96 per cent), and it is an important source of job stability. WWF performed a study to better understand the natural rubber value chain in the country because it is such an essential commodity for the country and the rural community.
The study discovered two major problems with the natural rubber industry: lack of sustainability and lack of traceability. The sustainability challenges stem from the fact that the industry is dominated by smallholders.
According to Dr. Adrian Choo, Lead for WWF-Malaysia’s Sustainable Markets Programme, “The lack of proper transparency and traceability in the natural rubber industry is rooted in the production system, as it is dominated by smallholders.
The incentives, or lack thereof, is a major influence on their attitudes towards the environment. This challenge is not unique to rubber, but to many other commodities in general.”
“There is also minimal disclosure in public corporate and sustainability reports for natural rubber. While the processing stages are relatively straightforward, there are complex sustainability challenges at the subsequent value chain stages,” Choo added.
Key factors such as sustainability platforms, smallholder equity, commitment and corresponding practices by major natural rubber buyers, and sustainable financing need to be present.
Some Malaysian furniture companies indicate the usage of Forest Stewardship Council (FSC) Controlled Wood and Programme for the Endorsement of Forest Certification (PEFC) certified wood.
The lack of transparency and traceability impedes the sustainability of the natural rubber sector in Malaysia. Financial support, incentives and group organisation are required to encourage rubber plantations to be certified.
Fundamental restructuring of the marketing system that will enhance greater financial returns to smallholders is also badly needed.
Malaysia’s rubber production for Jan-Oct falls 5.9pc to 397,486 tonnes
Wednesday, 15 Dec 2021 01:00 PM MYT
Chief statistician Datuk Seri Mohd Uzir Mahidin said natural rubber production in October was 90.5 per cent contributed by smallholders while the rest came from the estates sector. — Reuters pic
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KUALA LUMPUR, Dec 15 — Malaysia’s rubber production shrank by 5.9 per cent year-on-year to 397,486 tonnes in the first 10 months of this year from 422,324 tonnes previously, according to the Department of Statistics Malaysia.
The natural rubber (NR) output in October 2021 amounted to 43,127 tonnes, which was a 13.6 per cent drop from 49,943 tonnes in the same month last year but an increase of 4.7 per cent against the 41,180 tonnes recorded in September 2021, the agency said.
Chief statistician Datuk Seri Mohd Uzir Mahidin said NR production in October was 90.5 per cent contributed by smallholders while the rest came from the estates sector.
Total NR stocks fell 3.6 per cent in the month to 281,723 tonnes from 292,312 tonnes in September 2021.
Meanwhile, he said Malaysia’s NR exports amounted to 62,167 tonnes in October, down 0.3 per cent from September’s 62,332 tonnes.
China continued to be the biggest importer of Malaysian rubber for the month, accounting for 56.8 per cent, followed by Pakistan (3.2 per cent), the United States (3.0 per cent), Iran (2.7 per cent) and Germany (2.1 per cent).
“The export performance was contributed by natural rubber-based products such as gloves, tyres, tubes, rubber threads and condoms.
“Gloves were the main exports among rubber-based products with a value of RM2.6 billion in October 2021, a decrease of 15.0 per cent compared to September 2021 (RM3.1 billion),” he added. — Bernama
Rubber industry retains pole position this year
KUALA LUMPUR: The rubber industry retained its pole position in 2021 compared with other commodities, notching impressive growth and contribution to the country’s coffers as demand and production of rubber gloves were largely unperturbed by Covid-19 containment measures.
Malaysia is the world’s leading producer of medical gloves and the demand for the products has turbo-charged the industry to dizzying heights. It has met 68% of the global demand for this necessity for the past 30 years and for 2021, it is estimated to supply 280 billion pieces of rubber gloves.
The year saw new players joining the bandwagon to tap into new opportunities by venturing into rubber glove production despite the fact that the average selling price (ASP) is expected to fall further by 30% to 50% amid increasing market competition.
As in 2020, the forced-labour issue continued to haunt the industry this year.
The Malaysian Rubber Glove Manufacturers Association has stepped up its effort by giving its commitment to eradicate such practices which had tainted the industry’s image in the last two years.
Burgeoning demand saw exports of the rubber products as of October rise 55% to RM71bil from the same period in 2019 and for the whole year, it is expected to reach RM82bil, up by 38%, versus RM59.4bil in 2020. Out of that, natural rubber contributed RM7bil (8.5%), rubber products RM63bil (77%), other rubber RM2.5bil (3%), and heveawood RM9.5bil (11.5%).
According to the Malaysian Rubber Board (MRB), the rubber product sector plays an important role in generating high export value due to the surge in global demand for rubber gloves to curb the Covid-19 pandemic.
For the first nine months of 2021, rubber production amounted to 354,359 tonnes or about 5% lower than in the corresponding period of 2020. — Bernama
PETALING JAYA: Glove makers and tyre manufacturers may have to brace for higher material costs in the coming months.
It is worth noting that while Malaysian glove makers are largely focused on nitrile gloves at 60%, natural rubber gloves make up the remaining 40% of total production.
According to the Rubber Market Intelligence Report by the Association of Natural Rubber Producing Countries (ANRPC), global natural rubber prices are expected to remain supported in the short-term due to supply and demand disruptions as a result of the Covid-19 pandemic.
It added that the strengthening of crude oil prices would also provide support to natural rubber prices moving forward.
“The pent-up demand arising from the revival of economic activities world over, lopsided increase in demand, and the anticipated 200,000 tonnes of deficit in the current year can help natural rubber prices gain further in the last two months of the year,” ANRPC said.
The association highlighted that the demand for natural rubber will remain elevated especially from Europe, the United States, India and Japan due to pent-up demand driven by the lifting of Covid19-related restrictions, revival of transportation and other economic activities.
It said, based on history, the world’s consumption of natural rubber had seen “abnormal growth” following historic catastrophes.
After World War I, ANRPC said the world’s consumption of natural rubber surged by 33%, a 45% jump was seen in 1922 following the Spanish Flu, about 19% increase in 1933 after the Great Depression, and a whopping 121% spike in 1946 immediately after World War II.
“Although such abnormal growths are not expected in the present scenario, a moderate short-term boost can be expected as life returns to normalcy after nearly two years of lockdowns and restrictions,” it said.
ANRPC said it expected natural rubber consumption to increase by 8.3% to 14.0 million tonnes in 2021, slightly higher than the world’s supply of 13.8 million tonnes.
It added that the world’s consumption of natural rubber is anticipated to increase further between to 4% and 5% in 2022.
Moreover, the year from 2023 is expected to see natural rubber becoming globally short of supply and the deficit progressively widening in the subsequent years through 2028.
“The long phase of the deficit can extend to 2031, according to the projections made on the basis of the planting trends and potential expansion of mature areas in individual countries,” ANRPC said.
On the supply side, it said, despite the removal of almost all the Covid-19-related restrictions in major producing countries and a recent recovery in natural rubber prices, world production of natural rubber is expected to remain almost unchanged in November and December 2021 compared wth the previous two months of September and October.
Thailand, Indonesia, Vietnam, China, India, and Malaysia represent 81% of the world supply of natural rubber.
Over the last five years, the association pointed out that the natural rubber industry had been gripped by excess production capacity caused by “abnormal expansion” of the area occupied by mature trees.
“Although the global mature area is expected to expand by nearly 250,000ha in 2022, the resultant increase in production is likely to be absorbed by a robust global demand.
“Crude oil prices are expected to gain further strength in November and December 2021 supported by high winter demand for fuel oil and the pent-up demand arising from the revival of economic activities and normalisation of the transportation sector including the aviation industry,” it added.
With the increasing spread of Covid 19, more people have understood the importance of using PPE. Latex gloves hold a special position among these products. Learn more about latex gloves made in Sri Lanka. https://bit.ly/3iUGiVZ
Waiver from VAT on rubber products sought in view of low price
FE REPORT | Published: September 09, 2021 10:44:11
Bangladesh Rubber Board (BRB) sought withdrawal of 15 per cent VAT (Value Added Tax) on privately-owned rubber products as the sector had been grappling with lower prices.
It also requested the authorities concerned to increase duty on imports of synthetic rubber in a bid to protect the local producers.
Earlier, the private sector rubber producers requested the government to withdraw the imposed VAT on its rubber products at different meetings frequently.
In the meetings, private sector rubber producers mentioned that the imposed VAT is the main hindrance for the development of rubber cultivation.
Following repeated requests by the private sector rubber producers, BRB sought withdrawal of VAT on privately-owned rubber products.
The board sent the letter recently to the Ministry of Environment, Forest and Climate Change, for taking necessary steps in this regard. It also requested the government earlier in this regard.
Rubber farmers are facing a hard time due to lower market prices of their produces. The price of locally produced rubber keeps plummeting and shows a trend of fluctuating often as well, said industry insiders.
As a result, the private sector rubber producers incur losses financially, they added.
They have to spend around 24 per cent including 15 per cent VAT, and other taxes.
On the other hand, some factory owners are importing synthetic rubber sheets only at 5.0 per cent duty.
For this, the local producers have been losing interest to produce rubber, they said, adding the local produces are also losing competitiveness to the imported synthetic rubber items.
Vast tracts of leased hilly lands are becoming empty gradually and the possible risk of climate change is increasing, shrinking environment-friendly rubber cultivation, according to a source.
Earlier, Bangladesh Rubber Garden Owners Association (BRGOA) President Mohammad Kamal Uddin said, "We are facing losses due to continuous fall in prices of locally produced rubber. Besides, we are suffering more because of paying VAT."
He thinks that the government should provide subsidy facilities to the private sector rubber producers for the survival of the sector.
He, however, said rubber plantations had been established on around 10 million acres of land across the country under both the public and private arrangements.
In 2010, the price of rubber was Tk 300-350 per kg but it now has fallen to around Tk 140 per kg. Country started rubber cultivation during the 1980s.
There are 18 state-owned rubber plantation sites, including nine in Chattogram, four in Sylhet, five in Tangail and Mymensingh.
The country produces 17,000-20,000 tonnes of rubber annually.
Of the amount, around 10,000-12,000 tonnes of rubber are produced under private initiatives. Country's annual demand for the product is around 30,000 tonnes.
Earlier, BRGOA also requested the principal secretary and FBCCI president to take steps to withdraw VAT on rubber items.
Demand from the West and India likely to rebound; hindered supply from key producers to lift prices
Natural rubber prices are likely to firm up further, thanks to increased procurement by China in large quantities over the next few weeks, says ANRPC’s Rubber Market Intelligence report.
This is because the total NR inventory in China’s warehouses has substantially reduced as manufacturing companies currently prefer sourcing from domestic warehouses rather than importing.
China is expected to consume around 500,000 tonnes per month during August-November. Of this, about 115,000 tonnes can be met from the domestic production. The period of five months from July to November represents the season of peak production and China is expected to have a monthly deficit of 385,000 tonnes during the peak season of production. At this rate, the total deficit during the four months — from August 2021 to November 2021 — is estimated at 1.54 million tonnes.
Thus, the manufacturing companies in China are left with no choice to postpone the import of 2.40 million tonnes. The imminent entry of Chinese buyers into the Asian NR market for large-scale imports is expected to dominate sentiment in the physical markets atleast for the next couple of months, ANRPC report said.
Likewise, the demand from the US, EU, the UK, and India is also expected to rebound in the short term. However, the offtake from Thailand, Indonesia, Malaysia, and Vietnam is expected to soften due to the continuing spike in the coronavirus cases, low rate of vaccination, and the curbs introduced by respective governments.
