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 Rubber prices up, but Vietnam has none to sell

Natural rubber latex prices have been increasing steadily since the beginning of 2010. Yet even though the potential for profits is expanding, Vietnamese businesses have no rubber to sell.
According to the General Statistics Office, in the first two months of 2010, Vietnamese enterprises sold 68,000 tons of rubber latex with revenue of $170 million, a decrease of 11.3 percent in quantity, but an increase of 64.5 percent in income, thanks to better prices.

Though the prices keep rising, Vietnamese enterprises still cannot export rubber in large quantity because the first quarter of the year is not harvest time. In general, rubber latex export volume at this time is just equal to 10-15 percent of the whole year, while the supply is from stock left from the previous year.

As such, when the world rubber price rises, Vietnamese companies have none to sell. The price of every ton of rubber latex has surged from $2,190 per ton to $3,000 per ton, increasing by $800 or 27 percent.

The rubber price has risen in accordance with increasingly high demand. Vietnam can provide only 700-800 tons of rubber every day, while China needs 1,000-1,300 tons.

According to the Ministry of Industry and Trade, the import-export activities of natural rubber at Mong Cai and Dong Hung border gates with China have expanded since the beginning of March.

Trinh Van Vinh, Chair and General Director of Tay Ninh Rubber Company, reported that they sold out a month ago. Meanwhile, Nguyen Thanh Hai, General Director of Dong Phu Rubber Company, also admitted that the company has no product left. Hai explained that now only trading companies have rubber to sell, while producers all sold out a long time ago.

According to Nguyen Minh Khang, Deputy Chief Secretariat of the Vietnam Rubber Group, the natural rubber price in the world is decided by supply and demand, the oil price and speculators. As for rubber, Khang responded, it is not difficult to store rubber and wait to sell when prices go up. However, it is very difficult to forecast when the prices will hit their peak.

“The oil price has remained steady at over $80 per barrel, pushing production costs of artificial rubber up, which explains why natural rubber has become more attractive,” Khang detailed.

“If oil prices suddenly drop now, the natural rubber price will not stay high,” Khang noted.

He recalled the oil price fever in July and August of 2008, when price went up to nearly $150 per barrel. At that time, natural rubber rates also increased to $3,300 per ton, the highest peak in the history of Vietnam’s rubber industry. Since November 2009, when the oil price lessened, the rubber price also dropped to $1,200 per ton, making rubber growers suffer.

According to Khang, for 2010, experts all predicted that the rubber price would stay high, while the price would increase by 30 percent in comparison with 2009. They pointed to the high demand for rubber to make car tires, especially from China.

Dinh Van Tien, Head of the Import-Export Division of the Vietnam Rubber Group, averred that the Chinese Government’s policy to encourage the use of small trucks will make China’s vehicle output increase sharply in 2010.

“In June 2009, just one month after the country applied the demand stimulus policy, the sales of vehicles of China immediately increased by 37 percent compared to early May,” Tien calculated. The rapidly growing automobile industry in China will help stimulate the demand for rubber, thus pushing the price up.

Tien added that, in 2010, the world’s oil price is not likely to decrease while the global economy is recovering. Therefore, natural rubber will remain the optimum choice for tire-makers and healthcare equipment production.