Declining demand causes rubber price's down

The price of rubber has fallen markedly in recent months due to a slowdown in demand in international markets, particularly China.

The commodity currently fetches $1,300 per tonne in the local market, a drop of more than $100 compared to last year, according to figures from the Ministry of Agriculture.

This is bad news for investors in the Cambodian rubber sector, said Lim Heng, vice president of An Mady Group, a company that owns a rubber plantation and exports the product.

“At the current price, investors in the sector cannot survive. The cost of production is higher than that price at which the product is being traded,” he said, adding, however, that for small farmers the current price may be sustainable.

Mr Heng said that Vietnam, the biggest market for Cambodian rubber, saw a sharp decline in exports to China due to changing Chinese policies and fears over the US-China trade war. He said this affects Cambodia, as a good portion of the Kingdom’s rubber production is sent to China in indirect shipments that pass through Vietnam.

Given these price woes, the private sector is demanding lower taxes on rubber exports.

“Through the Ministry of Agriculture, the private sector has asked the government to tax rubber exports only for shipments that exceed $2,000 per tonne. However, there has been no response from the government yet,” Mr Heng said.

Figures from the Ministry of Agriculture shows that Cambodia exported 63,453 tonnes of rubber in the first four months of the year, an increase of 23 percent.

Prime Minister Hun Sen last week called on farmers and investors to keep rubber plantation amid the fall in prices.

“The price of rubber is declining, but I would like to ask farmers to now follow what seems to be the trend. Some farmers are cutting down their rubber trees and replacing them with cashew trees. When the price of cashew nuts decline, they will be forced to cut down these trees and find a new crop, incurring a large cost in labour,” Mr Hun Sen said.

An Mady’s Mr Heng said the price of rubber will remain stable until next year. “At the current price, existing rubber investors may be able to stay in business, but attracting new investors will be difficult.

“Without a new policy that gives more incentives, investors won’t dare come in. They will sit and wait until conditions improve.”