Sri Lankan mulls JV with Chinese firms to boost rubber yields

Sri Lankan’s rubber industry needs to focus more on production and productivity as the land allocated for rubber plantations is taken over for development purposes. Though there is a demand for our rubber exports, the demand could not be met as the consumption is more than 30 percent,” C.W. Mackie PLC Chairman/Chief Executive Officer W.T. Ellawala said.

The government aims to increase low rubber yields from the current 800 kg/ha to minimum of 2,000 kg/ha while venturing into high value-added products with the help of Chinese investments.

The Plantation Industries Ministry is currently facilitating the match-making between local and Chinese firms to establish joint ventures, which are targeted at setting up new plants and acquiring new technologies to boost rubber yields and production.

Sri Lanka’s finished rubber product exports are set to reach US $1 billion this year, despite the shortage in locally-produced natural rubber in the market, he said at the 100th Annual General Meeting of Colombo Rubber Traders’ Association (CRTA) held last Friday in Colombo.

The China Hainan Rubber Industry Group Co. Ltd is planning to enter Sri Lanka forming joint ventures with two regional plantation companies (RPCs) by mid 2020, so as to develop Sri Lanka’s plantation sector with a special focus on rubber value-chains.

“China Hainan Rubber Industry is conducting feasibility studies with the assistance and willingness of Sri Lanka’s private sector entities. The collaboration is aimed at growing rubber and manufacturing rubber-based products.

It is a tremendous opportunity for our country and for our industry, where natural rubber production is concerned. He said.

The Hainan Group is keen on playing a major role in certain projects within the Sri Lanka’s Rubber Industry Master Plan (2017–2026). The Group wants to implement projects now in the Rubber Master Plan in collaboration with Sri Lanka’s private sector,” he stressed.

It has also expressed interest in setting up a modern rubber plant in Sri Lanka that would need an investment of US $800 million. (China Hainan Rubber Industry Group Co. Ltd is a listed firm on the Shanghai Stock Exchange, with a market capitalisation of over US $ 4.2 billion. It’s is a subsidiary of Hainan State Farms Ltd that manages over 1 million hectares). 

 “Rubber production in Sri Lanka declined by 0.6 percent to 82.6 million kgs in 2018, whereas the rubber usage of local industries increased by 5.6 percent to 135 million kgs during the year,” GRI Tires Managing Director and Sri Lanka Association of Manufacturers and Exporters of Rubber Products (SLAMERP) Chairman Prabhash Subasinghe said.

Sri Lanka’s rubber product export is projected to reach US $1 billion this year from US $875 million last year.

Overall, Sri Lanka’s rubber exports, which include rubber and rubber finished products, grew 3.73 percent year-on-year (YoY) in 2018 to reach US $906.93 million, according to Export Development Board (EDB) data.

Rubber finished products grew by 4.78 YoY percent to US $ 875 million in 2018, while natural rubber exports declined 18.85 percent YoY to US $ 31.60 million.

“local natural rubber production is not sufficient to support the growing demand of rubber-based value added production. The value addition and manufacturing has increased, but we can’t do much without raw-materials. There’s a major shortfall in natural rubber,” he said.

Subasinghe said that there’s a shortage of natural rubber in the global market, and noted that domestic natural rubber production is crucial for local industries to expand production.

According to him, the rubber demand globally grew at a faster pace of 5.2 percent YoY in 2018, while the production grew only by 4.6 YoY, ultimately resulting in a deficit.

The United States, Germany and Belgium were Sri Lanka’s key exports markets for rubber products in 2018.