Rubber firms need more raw materials, association says

Novia D. Rulistia , The Jakarta Post , Jakarta | Fri, 04/11/2008 12:32 PM | Business

The rubber industry now has a production capacity higher than the amount of raw rubber available, threatening small companies that are unable to secure enough of the material, an industry leader said Thursday.

The Association of Indonesian Rubber Companies (Gapkindo) executive director Suharto Honggokusumo said investment in the sector following steadily rising rubber prices over the last few years had led to an excess of its installed production capacity.

"The surplus of installed capacity in the rubber industry is predicted to reach one million ton this year," Suharto said.

With investments in the sector being channeled mostly to larger companies with high production capacities, he said smaller players became less competitive as they were forced to compete to secure limited raw material.

"Investment aims at providing jobs for people. In fact, small companies are left behind, and some are gradually stopping their operations," Suharto said, without naming businesses.

Investments should be better controlled, possibly by involving the Ministry of Agriculture in the licensing process for the industry, he said.

"This is to make sure that new companies wanting to invest in the rubber industry have adequate raw material in producing rubber goods," he said.

Gapkindo data shows Indonesia produced 2.76 million tons of natural rubber last year, up from 2.63 million tons in 2006, making the country the world's second biggest rubber producer after Thailand.

Out of last year's total, 1.98 million ton was exported, with technically-specified rubber taking a 87.7 percent share, followed by natural rubber and latex.

Suharto predicted that this year the production of natural rubber would increase by 4.5 percent, while its demand would only grow by 1.7 percent.

Suharto said that low demand was the result of the estimated slowdown in economic growth of the United States, which is among the country's main export destinations.

According to the Central Statistics Agency (BPS), the export value of rubber-based products last year was valued at US$981 million.

Of this, $684 million was from tire and tube products, $121 million from latex goods, 96.9 million from industrial rubber goods and $78.4 million from general rubber goods.

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