RI rubber trees face axe for oil palm
RI rubber trees face axe for oil palm
TEBING TINGGI, North Sumatra (Reuters): Security guards with
automatic rifles patrol quiet forests of rubber trees on the
island of Sumatra in the most stark reminder all is not well in
Indonesia's rubber industry.
The gun-wielding guards are there to stop looters, many of
whom have become impoverished in Indonesia's economic crisis, and
emboldened by its political turmoil.
But plantation thieves are just one of the problems hitting
Indonesia's rubber industry, the world's second largest after
Thailand's, and fueling a rapid move out of rubber and into oil
palm.
Soaring costs, partly triggered by the need for tighter
security, weak prices, a shortage of latex and separatist
violence in northern Sumatra, are the other woes of the embattled
industry.
"Only 70 percent of our capacity is in use," said Jusnadi, the
manager of a factory at one of northern Sumatra's biggest rubber
processors, PT Adei Crumb Rubber Industry.
Jusnadi's factory, with a capacity of 3,000 tonnes per month,
is in Tebing Tinggi, about 100 km (62 miles) south of Medan, the
capital of North Sumatra province.
"We are experiencing a shortage in raw materials supply
because small holders have converted to other products."
Industry officials say Adei is one of the many processors
forced by a national latex shortage to shut down large parts of
their operations.
While international rubber prices hover near 30-year lows,
latex output has been cut by as much as a third because of
overtapping during recent years as farmers and plantations
struggled to ride out the Asian economic crisis.
Many rubber trees are suffering, especially as plantation
owners have skimped on fertilizers during the financial crisis.
"Normally we get 1.4 tonnes per hectare (per year) on average.
We now get only 800 kg (1,760 lb)," said Hakim Bako, marketing
manager at the state-owned PT Perkebunan Nusantara II plantation.
To make up for the latex shortage Indonesia is now having to
import some raw materials from Thailand, Vietnam and India, said
Syarbaini, executive secretary of the Rubber Association of
Indonesia, North Sumatra branch.
Looting has become a serious problem since last year's
election, the country's first democratic polls in nearly 40
years, as many Indonesians scramble to grab the rewards they feel
they were denied during decades of authoritarian rule.
Separatist violence in the island's northernmost Aceh province
is also scaring tappers away from Sumatra, which accounts for
about 40 percent of Indonesia's annual rubber output of about 1.5
million tons.
A global surplus in near-term stocks, including 140,000 tonnes
held by the now defunct International Natural Rubber Organization
(INRO), has dashed hopes rubber prices might pick up in line with
Asia's economic recovery.
Raw materials are traded at around 4,500 rupiah (48 U.S.
cents) per kg -- well below the 7,500 rupiah to 8,000 rupiah
industry officials say is necessary for rubber plantations to
break even.
"We made a loss of Rp 3 billion in our rubber business in the
first four months of this year," said T.P. Panjaitan at PT
Perkebunan Nusantara's Medan headquarters.
"Operating costs are rising," complained deputy plantation
manager Agus Sularso at one of the firm's plantations near Medan.
"Prices for fertilizer are high. Security measures also cost a
lot of money," he said.
More plantations and smallholders are now chopping down their
rubber trees and planting oil palm which they say holds more
promise, even though international prices for vegetable oil are
now low.
Global consumption of palm oil will rise in line with the
world's population, they say. Palm oil, the cheapest vegetable
oil, is also used to make soap and detergent.
"Prospects are much brighter for oil palm ... World rubber
consumption is unlikely to grow much," said Halomoan Siahaan,
plantation manager at the PTPN II plantation.