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Malaysian Rubber Board to launch new strategies to spur rubber industry [25-03-2013]  
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The Malaysian Rubber Board (MRB) is planning to launch a second edition of strategies for the local rubber industry within the next few months in view of the new challenges and prolonged issues in the thriving industry, according to director-general Datuk Dr Salmiah Ahmad.

The local rubber industry has shown tremendous growth over the years. In 2011, the industry contributed RM39.8bil in terms of export earnings, 200% higher than RM13.27bil in 2000 reflecting an annual average growth of 16.7%.

Despite the favourable growth, Salmiah told StarBiz that serious attention was needed to sustain the continued growth of both the rubber upstream and downstream sectors.

Under the upstream sector, the major areas which would continously be developed are the declining natural rubber (NR) production and the domestic low productivity.

She pointed out that the Malaysian upstream natural rubber production sector since 1982 has contracted in size especially in the estate sector as investors shifted factor resources to alternative investments that promise better return.

“This is due to long term price decline prior to 2002 which have made returns unattractive and incomes low for the smallholders prior to the price increases starting from 2002.

“Thus, under Economic Transformation Programme (ETP), the Government has initiated two Entry Point Projects (EPPs) such as increasing average national rubber productivity to 2,000 kg per ha per year by 2020 (EPP 1) and ensuring sustainability of the upstream rubber industry (EPP 2) to address this issue,” Salmiah explained.

These two EPPs are also initiated to overcome issue on low productivity and supply of NR. Despite efforts to improve productivity and production, she noted that production of NR had decline by 8% to 9% in 2012 owing to unfavourable weather conditions.

“There is no indication to show that production will pick up this year. What more with unskilled tappers used in harvesting have seriously impacted on rubber trees in the long run,” she added.

Productivity still remain low due to the existence of old and low yielding clones, ageing smallholders that do no comply with good agriculture practices, unskilled harvesters and low adoption of latest latex harvesting technologies and low mechanisation.

According to Salmiah, Malaysia's average yield per ha stands at about 1,500 kg, which is much lower than other major NR producing countries like Thailand, Indonesia and Vietnam.

On the downstream Sector, she noted that industry players particulary rubber-based product manufacturers had to dealt with the implementation of the minimum wage, increase in gas tariffs and NR feedstock prices, labour shortage and also growing environmental-related issues.

With the implementation of the minimum wage since Jan 1 this year, a minimum hike of around 29% was expected, Salmiah said.

For example, the domestic rubber glovemakers which rely more on manual labour, have been on a labour reduction drive.

It is believed that many of these players had incurred capital expenditure of RM70mil to RM80m each to improve on automation levels as “they plan to cut their unskilled workforce involved in stripping, counting and stacking by as much as 30% in 2013,” explained Salmiah.

“The impact of the wage hike for major manufacturers could be as little as 2% of total production cost this year as a result of the decrease in the number of workers. In general, labour accounts for 8% to 9% of the glovemakers' total production cost,” she added.

However, the implementation of the minimum wage will not have an impact on labour in the upstream sector as the current wages received by workers in rubber plantation are well above the minimum wage recommended.

In addition, gas accounted for 4% to 7% of the total production costs of glove making and therefore any increase in gas tariffs would also see rubber glovemakers' costs increasing by 5% to 8% this year, said Salmiah.

“The cost of raw materials (NR feedstock) for glove manufacturers is expected to register an increase between February and May this year as the wintering season sets in and NR production will decline.

“Rubber prices in turn will trend lower once production returns to normal after the wintering season,” she said.

For this year, Salmiah also expected the strong demand for nitrile gloves to continue to take away the market share of latex rubber gloves.

In Europe, the latex versus nitrile demand split was at 65%:35% compared with the United States whereby the split was about 30%:70%.

Salmiah said this was due to the price competitiveness of nitrile gloves as they were a premium substitute for latex powder-free gloves.

“The nitrile glove demand grew at around 20% to 30% in 2011-2012, and it is expected that the double-digit growth momentum will continue into 2013,” she added.

Meanwhile, both the midstream and downstream sectors would continue to depend on the importation of NR either in latex or dry rubber from the neighbouring rubber producing countries.

Based on statistics in 2011, Malaysia imported 667,434 tonnes of NR which comprise of 45% latex while the remaining of 55% is dry rubber. But she pointed out that focus has been given to the recent shortage of latex to meet the requirement of latex based products which contribute about 80% of export earnings of rubber product sub sector.

Salmiah said the local rubber industry was also facing shortage of labour particularly in the upstream and downstream activities and has to depend on foreign workers.

In 2010, 52.7% of 78,878 workers in the rubber product manufacturing were foreign workers. Substantial costs have been incurred by manufacturers to recruit and train new foreign workers from time to time.

Therefore, the continued scarcity of labour experienced by the local rubber industry would also increase the cost of production among industry players this year, said Salmiah.

Another emerging issue is on the growing concern on the environment which resulted in the introduction of stringent international standards for environmental protection, which constitute non-tariff barriers imposed by importing countries.

“The rubber industry particularly the midstream sector is constantly facing increasing stringent environmental regulations due to global trends towards environmental awareness and conservation,” Salmiah noted.

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