Indonesia sees high rubber demand in 2004

Eva C. Komandjaja, The Jakarta Post, Jakarta

Indonesia sees rubber export values for 2004 set to increase in relation to high demand from tire industries in China and the U.S., and from the stability of rubber prices in the international market after it hit a 30-year low of 46 U.S. cents in 2001.

"The automotive industries are the main parameter for determining rubber exports. If those industries grow, then we can expect the rubber demand will also be higher ,because we mainly export rubber for tires," said Daud Husni Bastari, chairman of the Indonesian Rubber Producers Association (Gapkindo).

He explained that 90 percent of rubber exports consisted of Technically Specified Rubber (TSR), or Standard Indonesian Rubber (SIR-20), which is mostly used for tires, while the remaining 10 percent consisted of Ribbed Smoked Sheet (RSS) and Latex Concentrate.

Daud said that a delegation was sent to the Shanghai Future Exchange in November to promote Indonesian rubber in the Chinese market, since automotive industries in China were booming.

He said besides China and the U.S., South Korea and Japan were also main targets for rubber exports because the automotive industries in those countries were growing rapidly.

Indonesian rubber exports to the U.S. made up 39 percent of total exports in 2002, an increase over last year's 36 percent. Meanwhile, exports to Japan and South Korea reached 19 percent in 2002, higher than last year's 15 percent.

Daud also pointed out that rubber prices had finally reached a plateau after fluctuating throughout 2003, at a price of US$1.18 per kilogram as per Dec. 1. Prices were unstable over the past two years, ranging from 46 cents to a maximum price of $1.48 in November 2003.

A stable price above US$1 will encourage rubber production in Indonesia and will also increase total rubber export value.

He said so far, the government did not plan to cut rubber production or rubber exports, now that prices were better compared to previous years.

But the government would still monitor prices continuously. It had also set a reference price, so when prices fell below the reference level, it would start to cut down on production.

Daud was referring to a Memorandum of Understanding reached at the International Tripartite Rubber Companies Consortium (ITRCo) in August 2002, saying that the consortium would cut four percent of the rubber output and 10 percent of rubber exports in order to boost the international market price.

Malaysia and Thailand, he said, the two other signatories of the agreement, had not cut down on their production rate so far.

Daud expressed a concern about the rubber plantations' productivity -- Indonesia has the largest plantation area among the three countries, but Thailand has been the world's largest rubber producer and exporter up until now.

He said the main cause of the low productivity was because most of Indonesia's rubber trees were aging.

"The productive life of a rubber tree is approximately 25 years, and most of our rubber trees are 20 years old, nearing the end of their productive life," said Daud.

He said most rubber plantations had now allocated about 4 percent of their rubber trees to be replaced in a rejuvenation program, hoping to increase rubber production.

Rubber plantations in Indonesia occupied 3.32 million hectares in 2002, compared to 3.35 million hectares in 2001. It is reported that the plantation area is decreasing.

Thailand, along with Indonesia and Malaysia, produce 79 percent of the world's natural rubber.