Home Insider Insider Analysis Tapping the White Gold Rubber

Tapping the White Gold Rubber

Myanmar rubber exports are set to soar, and could even double within three years, say some industry experts. Plans to diversify the rubber market and improve the quality and added value of the product are being studied.

About 70 percent of Myanmar’s rubber exports go to China, Malaysia, Korea and Singapore, leaving only 8% for local use. The Asia Pacific has been the largest rubber consuming region since 1986 due to its economic and population growth. According to the Thai Rubber Association, the Asia-Pacific currently accounts for 57 percent of global rubber demand and will remain the world’s strongest growth market for rubber.

“Western countries are also increasingly interested in buying Burmese rubber” says an official of the Myanmar Rubber Planters and Producers Association (MRPPA). Germany, Austria, Denmark and New Zealand have shown keen interest. The International Rubber Study Group predicts by 2020 global demand for natural rubber will outpace supply by as much 1.4 million metric tons.

Today, rubber industry is the second largest industry in the world after iron and steel. It is one of the most important raw materials that are important for transportation, industry, defense and medical fields. Natural rubber (NR) and the different types of synthetic rubbers are used in many different end-products. The former is made from the latex derived ‘naturally’ from the rubber tree, while the latter is synthesized from chemicals sourced from petroleum refining. The main use of natural rubber is in automobiles. The other category, general rubber goods, includes hoses, belting, footwear, surgical goods, and rubberized cloth. In developed countries nearly sixty per cent of all rubber consumed is for automobile tyres and tubes. In heavy duty tyres, the major portion of the rubber used is natural rubber. In addition to tyres a modern automobile has more than 300 components made out of rubber. Many of these are processed from NR. Uses of NR in hoses, footwear, battery boxes, foam mattresses, balloons, toys etc., are well known. In addition to this, NR now finds extensive  use in soil stabilization, mining, in vibration absorption and in road making.

Burma is currently ranked seventh in rubber production in Southeast Asia, behind Thailand, Laos, Cambodia, Indonesia, Bangladesh and the Philippines Throughout the country some 1,430,000 acres are devoted to rubber only, according to a report by the Ministry of Agriculture. Myanmar’s rubber production went up by over 40,000 tons, reaching over 100,000 tons in the fiscal year 2011-12 from over 60,000 tons in 2005-06. It is during this period that both Chinese subsidies for rubber production became available in northern Myanmar as well as the central Myanmar government increased the allotment of private rubber concessions to Myanmar companies. These two government backed programmers for rubber development in Myanmar have targeted different geographies with an overall significant increase in rubber development.

Around 85 percent of rubber globally is, in fact, produced by smallholders, with farmers typically owning plots of land ranging anywhere between 5 and 100 acres. Rubber grows well in Tanintharyi region, Kachin, Kayin and Shan states where planting of rubber is being transformed from a small scale to a commercial scale. Rubber is also produced in Rangoon and Pegu divisions. The beauty of rubber is that farmers can plant it with other cash crops such as banana, tea, coffee, cocoa, cassava and pineapple. Not only does this reduce competition for land, it also provides an alternative income for farmers, and the diversity of crops provides a source of food for families. Rubber tapping commences from the sixth year onwards. Rubber tapping is the process by which the latex is collected from a rubber tree. The yield continues for 25 years after which the replantation is done in the 32nd year. The trees cut after 32 years of cultivation fetch good prices as the same is sold as rubber wood and is very popular for manufacturing household furniture

According to MRPPA, in terms of rubber cultivation, Myanmar ranks ninth in the world and two thirds of the total rubber cultivated is in Mon State. About 70 per cent of rubber production in the country is targeted for export. Ninety per cent of the rubber is exported to China and five ASEAN countries -Malaysia, Singapore, Vietnam, Thailand and Indonesia. While China is the main rubber importer from Myanmar, and Chinese middle men seem to operate local rubber economies in northern, eastern and southern Myanmar, the recent investment interest in rubber production and processing by Malaysia and Thailand indicate that there will be increasing demand and therefore competition on Myanmar’s rubber exports. Rubber from Myanmar is also exported to Korea and India.

But Myanmar is far from posing a threat to the world’s top rubber producer, Thailand. The rubber sector has been growing rapidly since 2005, but still needs to improve the quality of its product and to develop export strategies, said U Khaing Myint, secretary general of the Myanmar Rubber Planters’ and Producers’ Association. The best quality rubber in Burma current sells for $3,000 per ton, around $350 less than the best quality rubber in neighboring Thailand. “Thailand is more diversified in terms of both products and market,” said Paul Baker, chief executive of International Economics. “Myanmar rubber had huge potential, but its product was too low grade and needed diversification” he added.

Because of its quality, the price of Myanmar rubber is far lower than the world rubber price, and despite the lifting of sanctions, Myanmar can export only 20 tons of rubber to Europe, said U Khaing Myint.

“We’re looking at how we can upgrade and add value to the product. The world price is US$2500 per ton but we get less than $2200. We export RSS1 (Ribbed Smoked Sheet), RSS3, RSS5, MSR20 and MSR50 grades of rubber, mostly RSS3 and MSR20 (Myanmar Standard Rubber),” said Myint.

Driven by global demand and mainly by the automobile (tyre) industry, natural rubber is a valuable commodity and plantations and processing facilities are continuously striving to increase yield, enhance productivity and improve quality to meet compliance and global standards.

With demand far outstripping supply and prices on the upswing consistently over the last 25 years it makes eminent sense to promote the cultivation of this plant species both as an investment as well as making the country selfsufficient in this very important raw material.