Vietnam’s Rubber Industry Suffers as Synthetic Rubber Use Increases

Vietnam, the world’s fourth largest rubber exporter, is faced with rapidly dropping natural rubber prices as a result of the global recession and the increasing use of synthetic rubber. According to the Vietnam Rubber Association, global tyre production, which accounts for more than half of the world’s rubber supply, is expected to grow more slowly in the years to 2010. Growth of between 2 and 3 per cent is anticipated compared with the 3.4 per cent growth enjoyed in 2007.

Tran Duc Vien, director of the Hanoi Agriculture University, said that current crude oil prices, which have dropped more than 70 per cent since July, are encouraging the use of synthetic rubber, which is in turn causing natural rubber costs to sink. This increased use of synthetic rubber has coincided with Vietnam’s peak latex production period (September to December), and a huge supply of rubber has arrived onto what has become a buyer’s market – in 2007 a ton of natural rubber could fetch US$2,700. In December 2008 this same quantity sold for only around $1,300. Vietnam’s Ministry of Agriculture and Rural Development are forecasting further price drops in 2009.

The Vietnamese government is apparently planning to purchase 100,000 tons of rubber to reduce farmers’ stockpiles, reduce interest on bank loans to rubber firms and not increase the area currently cultivated for rubber, commented Nguyen Tri Ngoc, head of the country’s Cultivation Department. “Vietnam will grow saplings to replace old rubber trees on some 150,000 hectares. We can tap latex from them after six years…the global economy may recover after 2010, and rubber from the new trees could enjoy high prices.”

According to the ministry, in 2007 Vietnam exported 719,000 tons of rubber, worth $1.4 billion or 85 per cent of its total output.