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World financial crisis doubling up rubber industry
The Vietnam Rubber Industry Group is facing the risk of having long-term rubber export contracts which consume 60% of its output broken. The rubber price has been plummeting.
Rubber price on the decrease
Rubber seems to be the farm product suffering the earliest impacts of the global financial crisis. The rubber price has been sliding dramatically, while rubber-related industries are in precarious positions.
Dinh Van Tien, Head of the Import-Export Division under the Vietnam Rubber Industry Group, said that the rubber price has been falling continuously with no signs of stopping.
He said that the price began decreasing in August but has been plunging since early October with the price falling down by VND15mil/tonne just in the last 10 days.
The rubber latex price was at its highest peak in July 2008 at VND58mil/tonne, while it was VND30mil/tonne yesterday, October 13.
According to the Vietnam Rubber Association, as the crude oil price has decreased by nearly 50% to $77/barrel yesterday, the trend of using synthetic rubber has returned, which means a decrease in the demand for natural rubber. Moreover, as the financial crisis has slowed down the economic growth rates in many countries, the purchasing power of cars and tyres in developed countries has been slowing down.
China and Japan, which has been importing rubber to produce tyres for sale to the US and Europe, have suffered from the lower purchasing power in crisis-stricken countries. Meanwhile, China consumes 60% of Vietnam’s rubber exports, while Japan15%.
Le Thi Oanh, who has over 1 ha of rubber in Long Xuyen commune in Phuoc Long district in Binh Phuoc province, said that in September, she sold rubber latex at VND15,000/kg, while the price has dropped by a half to VND6-7,000/kg, with which farmers cannot make profit.
Meanwhile, Dinh Van Tien, a rubber grower, said that refined rubber latex is selling at VND30mil/tonne, the same as the production cost, which makes rubber exporters also unable to earn profit.
The worries of Vietnamese rubber plantations
The Vietnam Rubber Industry Group said that it has signed long-term contracts to export 60% of its output of 300,000 tonnes. The biggest worry of the group is that if tyre factories in China and Japan are facing difficulties in selling products they might break material supply contracts with partners in order to minimise losses.
“What we can do now is try to persuade our partners to adhere to the signed contracts. However, the risk of partners breaking contracts remains high,” Tien said.
Some experts have forecast that the price of rubber may drop to around VND10mil/tonne, a price not seen since 2000.
Meanwhile, the rubber growing area in Vietnam has been increasing sharply as farmers have rushed to grow rubber hoping to get fat profit. In Tan Uyen district in Binh Duong province, people have even been growing rubber in rice fields. The province expects to have 105,000 ha of rubber by 2010.
VNN
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