Financial Times

Plantation firms proved wrong on rubber demand weakening
Rubber prices up at world record levels
Sri Lankan rubber prices rose to its highest level-ever last week with RSS trading at Rs 200 per kg due to rising demand and short supply creating problems for rubber products’ manufacturers while an expert said prices will fall but not below Rs 175 per kg.

“Rubber products manufacturers, who are selling products in the competitive market must not expect rubber to be purchased at less than US $1.75 per kg in the future,” noted Dr. L.M.K. Tillekeratne, Director of the Rubber Research Institute (RRI), who also took a dig at plantation companies and some scientists who said rubber had lost its bounce in 2002.

In a statement reflecting on rising prices and the impact on rubber products, the RRI chief said if not for this wrong prediction (in 2002) by those advocating and promoting oil palm plantations in southern Sri Lanka to replace rubber, the rubber-based industries would not have suffered like what they are facing today.

“Again if the rubber products manufacturers paid a higher price for the latex of smallholders they would not have neglected their plantations thereby reducing the production of rubber. We Sri Lankans still import over 10,000 metric tones of rubber and latex annually from neighbouring countries to run the rubber-based industries,” he said.

Since early 2006, the prices of all grades of rubber including latex have risen with sharp increases from the beginning of February this year.

Dr Tillekeratne said that earlier when prices rose above a certain level, dry rubber-based industries imported certain cheap synthetic grades of rubber as a substitute for NR (natural rubber) in making their products even though quality of the end product was slightly inferior. “But with the unexpected rise in the price of oil, synthetic rubber prices have also increased to a level beyond the accepted price level for manufacturers and this has caused great hardships to products’ manufacturers.”

He said that according to estimates, there would be a deficit of six million MT of rubber in the world in 2035 and raised the question as to where would this be produced. There is no extra land available anywhere in the world to expend the rubber plantation, without disturbing forest reserves.

The RRI chief said that to cater to growing local demand for natural rubber which is estimated to be above 150,000 MT by 2015, plans are under way to extend rubber planting to non-traditional Moneragala and Badulla districts.

Even though the private sector was involved in this programme, progress made so far is far below expectations and hence it is not possible to expect a large contribution to the local rubber requirement from these intermediate zone areas within the next six years, he added. Dr Tillekeratne said that all efforts must be taken to convert most of the unutilized or barren land into natural rubber farms, which will not only benefit the natural rubber industry in the country but will also contribute to the environment of Sri Lanka.

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