Oversupply likely to plague Vietnam's rubber industry for years
With supply forecast to outstrip demand in the global market, the country's rubber industry is expected to have a difficult time over the next few years, according to the Vietnam Rubber Association.
Speaking on the sidelines of its fourth congress held recently in Ho Chi Minh City, Tran Ngoc Thuan, chairman of the association, said the country exported more than 1 million tonnes of natural rubber, valued at US$1.78 billion last year, a year-on-year decrease of 0.7% in volume and 28.4% in value.
Global rubber demand has only increased slightly in recent years, but supply has shot up, pushing prices down.
Thuan said international organisations expect prices to remain low in the coming years.
To cope with the situation, he said, producers should reduce the frequency of latex extraction to cut expenses and raise productivity.
Besides making efforts to boost exports to existing markets, companies should look for new markets and improve product quality, he said.
They should survey the market and make products that are in demand, for instance reducing SVR 3L production and increasing that of SVR 10 and 20, he said.
"The country exports more than 80% of its raw rubber output. We have suggested the Government and the Ministry of Agriculture and Rural Development should take measures to reduce it to 50% by 2020.
"For this, we must set up an industrial park with incentives to attract international producers and consumers of natural rubber; they will then export finished rubber products from Vietnam."
In addition, he called for co-operation between producer and user members of the association.
He also called for government support to help the industry overcome its difficulties, including exemption of land rents for the first several years when rubber trees do not yet yield latex.
Vietnam ranks third in the world in rubber production — and accounts for 8.1% of global output — behind only Thailand (34.1%) and Indonesia (26.9%).
It exports to 86 countries and territories, with China being the largest market.
According to a report by the association at the event, rubber product exports increased by 35.3% last year to US$1.5 billion, with 35.3% coming from tyres.
But import of rubber products was US$65.6 million higher than the exports, the association said.