Rubber-wood industry in Sri Lanka threatened

Compared to the vast extents of rubber plantations in Indonesia, Malaysia, Thailand, India and China, Sri Lanka is now left with only around 114,000 hectares (Ha). Ironically this is a dramatic drop from the 165,000 Ha level in year 2000. Labour shortages and low prices for latex were attributed to poor economic returns during 2000 – 2005. Large extents of the plantation were converted to oil palm and tea. This trend has now reversed as the price of latex has more than doubled. The rubber tree has a maximum life span of 30 – 35 years. In order to ensure continuity of the plantation cover, usually a country-wide average of 3% of the plantation is annually uprooted and replanted.

This is the industry norm. Depletion during 2000 – 2005 by 51,000 Ha (31%) was possible only because there was one large consumer for the felled trees. During this period less mature, good latex yielding trees too were cut down. Now the latex prices are high, and not much mature trees are available for uprooting. It has been estimated that only around 2% of the acreage is felled annually.

There were well established industries in the fields of flooring, industrial brushes, wooden toys and furniture which consumed exclusively rubber wood. Most of these industries are either fully closed down today or operating at levels far below their installed capacity simply because adequate quantities of rubber logs are not available.

The leading flooring company in Sri Lanka consumed around 20,000 cbm (cubic metres) of rubber logs annually generating direct employment to nearly 600 people.

Similarly, another brush block manufacturing company in Attanagalle consumed a like amount employing around 600 people. Still there are a few companies engaged in the manufacture of added value rubber wood products mainly for export. The available quantity of saw logs is only 96,900 cbm per year. Perhaps the five largest companies in Sri Lanka in flooring and industrial brush export have installed capacity to consume even more than this available quantity of saw logs. Flooring and brush industry generate one direct employment opportunity to every 30 cbm consumed annually.

Toys and furniture industries offer one employment opportunity to every 20 cbm consumed annually. Apart from such direct employment, many people are employed in the saw milling, chemical and kiln processing which supplies lumber to the other industries. These primary industries offer one employment to every 100 cbm of saw logs consumed annually.

In comparison, the process of MDF board (MDF - Medium Density Fibre) manufacture is very sophisticated and highly mechanized. An industrial plant with installed capacity of 100,000 tons of MDF board (or around 138,000 cbm) per year needs around 276,000 cbm of saw logs of rubber wood.

The difference between the required 276,000 and available 96,900 cbm (179,100 cbm) is supplemented by the use of rubber wood branches of over 3” diameter and whatever other types of trees available. Also, the entire MDF factory can be operated with a work force of 150 people. The industry norm is less.

This means one employment opportunity is generated for every 1,840 cbm consumed annually.

MDF boards have many technical limitations and are sold for US$ 175 per cbm in the international market. Both industrial brushes and flooring are sold at over US$ 800 per cbm and both toys and furniture are sold at over US$ 1,000 per cbm.

The MDF factories are designed to suit developed countries where labour is expensive, but it consumes more electricity.

The cost of electricity in the MDF plant was said to be 60%, amounting to a staggering US$ 5.1 million annually. If a 40% subsidy is allowed by the BOI, the value of the subsidy is US$ 2.04 million (Rs 212.16 million) annually.

This subsidy can fund saw logs delivered to the MDF (Merbok) factory at Rs 2,189.00 per cbm (Rs 62.00 per cubic foot or Rs 1.67 per kg).

Fresh rubber logs delivered to the local furniture factory are paid at Rs 160 per cubic foot or Rs 5,680 per cbm without having any subsidy. This works out to Rs 4.32 per kg as against Rs 3.80 paid by the MDF factory.

There are over 100 small, medium and large rubber-wood based industries already operating in Sri Lanka. They make over 100 different efforts to procure the total requirement of 96,900 cbm of saw logs per year. Since this total quantity is only 35% of the timber required by the MDF factory, the scale of economies is favourable and they buy large extents of rubber land en-block, thus leaving no chance to the domestic industry to compete for this scarce commodity.