Rubber investment urged as global prices hit records

A Thai worker stacks rubber sheets ready for shipment. Global prices for rubbber have soared in recent months on expectation of increased demand. BLOOMBERG

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There is high demand for rubber on the global market, so we need more investment in the sector."
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(CAAI News Media)

Wednesday, 06 January 2010 15:02 May Kunmakara

Government says it will ‘welcome’ any investor that wants to plant rubber as prices soar on signs of global recovery

The government is urging more investment in rubber plantations in Cambodia to take advantage of high prices on global markets.

Ly Phalla, director general of the General Department of Rubber under the Ministry of Agriculture, Forestry and Fisheries, said rubber was now fetching around $2,800 per tonne, up from $1,000 per tonne early last year.

“There is high demand for rubber on the global market, so we need more investment in the sector. Whoever wants to plant, we welcome them,” he said, adding that investment in rubber plantations has no negative impact on local farmers.

Prices for rubber in Cambodia have soared in the latter half of the year, reaching $1,918 per tonne in October, $2,435 per tonne in November and about $2,800 at end of December 2009, Ly Phalla said.

The increase came as demand for rubber soared on the global market amid expectations that manufacturing may recover from a slow 2009 as the US economy began to “sing” in recovery, he said, adding that rising oil prices also contributed.

Prices of the two commodities tend to track each other as oil can be used to make synthetic alternatives to rubber for use in some products.

Global high

Rubber on international markets has risen to a 15-month high this week. Rubber for June delivery rose 1.9 percent to an intraday high of $3,136 a tonne Tuesday on the Tokyo Commodity Exchange, the highest level since September 25, 2008.

Prices more than doubled last year, the best performance since at least 1976, according to Bloomberg data.

Natural-rubber stockpiles monitored by the Shanghai Futures Exchange rose 2,855 tons to 144,548 tonnes, the bourse said Thursday. It was the highest level since November 2004.

US manufacturing expanded in December at the fastest pace in more than three years, data showed Monday. Crude oil traded near a 14-month high as freezing weather and improving global economies bolstered the outlook for fuel demand.

The call for increased production comes as December reports from the Association of Natural Rubber Producing Countries predict that natural-rubber output and exports from Indonesia, India and Vietnam may gain this year.

Output in Indonesia, the second-largest producer, may reach 2.68 million tonnes compared with 2.595 million tonnnes in 2009, according to the association. Exports may rise to 2.3 million tonnes from 2.1 million tonnes, it said.

Vietnam may produce 680,000 tonnes, up 4.6 percent from a year ago, and export all of it, the group said.

India may produce 848,000 tonnes, up from 822,000 in 2009, as shipments increase more than three times to 45,000 tonnes, the group said.

Cambodia currently has 123,000 hectares of rubber plantations and is expected to have 150,000 hectares under rubber by the end of this year, Ly Phalla said.

However, Cambodian Rubber Association President Mak Kim Hong said he expected the area under plantation to exceed government estimates, with Vietnamese investors in particular beating a path to the country.

Cambodia signed a memorandum of understanding in November with the Vietnam Rubber Group in Cambodia, a consortium of 14 Vietnamese firms that plan to invest $600 million in Cambodia’s rubber sector by 2012.

They aim to plant 100,000 hectares of government concessions in rubber in Kratie, Kampong Thom, Preah Vihear, Ratanakkiri and Mondulkiri provinces by that time. They also plan to build 10 processing plants to produce dry rubber for exports to international markets.

Mok Kimhong, who has 15,000 hectares in rubber in Kampong Cham province, 7,000 of which is currently producing, said most rubber exports already go to Vietnam. The rest goes to Malaysia, Thailand and Singapore, with some bought by Germany and France. Mok Kimhong said he exported around 9,000 tonnes of natural resin to Vietnam last year.

Official export figures of resin were not available Tuesday but Ly Phalla previously said Cambodia exported 50,000 tonnes last year and 40,000 tons in 2008.