The Sunday Times FT - Rubber re-planting on the rise due to good prices

Sri Lankan rubber plantations are on a major re-planting overdrive as prices have begun rising in the international market.

The market has been catching up since end of 2003 yielding record high prices in the last few months.

According to many experts in the industry one of the main reasons for the sharp increase in the rubber prices is due to the rising oil prices which has made the price of synthetic rubber, a by product of oil, gain sharply. Further the increase in the demand for natural rubber requirement has made the demand for natural rubber increase sharply which has resulted in high prices.

“The price for crepe rubber has been increasing steadily since the beginning of 2003, and it reached an unusual high of four dollars in May and July. However the prices are expected to stabilize somewhere in the range of 2.20 US dollars per kilo of crepe rubber,” said Upali Bandaranayake, Director of Forbes and Walkers Ltd.

He added that industry experts have speculated that the prices would remain at these current levels till about 2012. Traders said rubber prices were around Rs 80 per kg in September 2003.

As a result of rising demand, rubber plantations have picked up on their re-plantation scale which was cut down in the past years when the rubber prices were as low as Rs 80. “We stopped replanting when the prices were low, at present we are catching up on replanting; we do about 150 hectares a year at present. All plantations in the rubber industry are doing the same,” said Dushantha Delwita, General Manger of Namunukula Plantation from the Richard Pieris Group.

“The International Rubber Study Group (IRSG) estimated that the demand for natural rubber will rise to 13.5 million metric tons per year by 2010 but the estimated production is 10 million. No country has the resources to meet this requirement, so the prices will rise,” said Dr. L. K. Thilakaratne, Director of the Rubber Research Institute who retired last month.

According to Thilakaratne the demand for natural rubber will grow and the country may face a rubber shortage for local industries, involved in added-value production, in the future.

Two of the consumers of rubber are India and China in the Asian region and what is available in the international market will be consumed mostly by these two countries. At present the country imports around 15,000 metric tons of a different types of rubber from countries like India, Thailand and Vietnam but this will not be possible by 2010 as the prices will increase along with the demand.

“That is why we must plant rubber more in non traditional areas such as Monaragala, Badulla and Hambantota and in the abandoned tea lands. There are over 40 hectares of abundant tea land in the hill country; the RRI has conducted research which was highly successful. We have successfully planted rubber even at 2500 ft above sea level using a Sri Lankan cloned rubber variety,” said Thilakaratne.

The labour shortage experienced by many small and medium rubber plantations is also expected to ease. According to Thilakaratne there was a shortage of rubber tapers as the estate workers went for more lucrative jobs when rubber was not a profitable crop while during the rainy season there was no work for the tapers. With the introduction of the rain guard the yield has increased by 30% providing year-round work for the tapers.

The government has also taken steps to encourage rubber re-planting by increasing the subsidy given to rubber smallholders by 150%, providing Rs 125,000 per hectare against Rs 50,000 earlier. This is now available to the estates as well. Another 50% subsidy is given when installing the rain guard in the plantation.

“The rain guard is becoming more popular in the industry at present, the planters can easily recover the investment in a very short period as the rain guard will increase the yield by about 30% as it helps to tap the trees even during the rainy season,” explained Thilakaratne.