Rubber prices rose on Wednesday morning (26/07) as the Japanese yen weakened against the US dollar. The price of rubber (December 2017 delivery, the most-active contract on the Tokyo Commodity Exchange, or Tocom), had gained 1.04 percent, or 2.2 points, to 213.70 yen per kilogram (kg) by 10:26 am local Jakarta time, after opening sideways at the level of 211.50 yen per kg. Yesterday, rubber prices climbed 1.05 percent.
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The price of rubber rebounded on Tuesday morning (25/07), in line with the strengthening of crude oil prices. The rubber price (December 2017 delivery, the most-active contract on the Tokyo Commodity Exchange), had risen 2.05 percent to 213.60 yen per kilogram (kg) by 10:05 am local Jakarta time, while earlier this morning, rubber prices had in fact fallen 0.62 percent directly after the opening of trade.
Rubber prices fell sharply on Monday morning (24/07), in line with the strengthening Japanese yen. The price of rubber (December 2017 delivery, the most active contract on the Tokyo Commodity Exchange), had slid 2.33 percent to 209.50 yen per kilogram (kg) at 10:28 am local Jakarta time.
The Indonesian Rubber Board says Indonesia's rubber production is expected to reach 3.16 million tons in 2016, up 1.61 percent (y/y) from last year's realization. The board said rising output comes on the back of an increase in the size of Indonesia's rubber plantations and an increase in productivity at the existing plantations. Indonesia is the world's second-largest rubber producer (after Thailand) and therefore its output has a major impact on global rubber prices (about 85 percent of Indonesia's rubber production is exported abroad).
Rubber production in West Java continues to decline each year as ageing rubber trees cause lower productivity. Jabar Iyus Supriatna, adviser to the Indonesian Rubber Farmers Association (Apkarindo), therefore requests the government to take action and increase support for Indonesia's upstream rubber sector. Reportedly, the average yearly rubber output in the province of West Java fell to below the 750 kilogram per hectare mark. Supriatna said production should be optimized to about 1.5 tons per hectare in this province (through the rejuvenation of the rubber trees).
Indonesia, the world's second-largest natural rubber producer, is expected to see slowing rubber output in 2016 on the back of the El Nino weather phenomenon as well as haze caused by forest fires on Sumatra and Kalimantan. Although the production decline may support rubber prices in the middle-long term, Indonesian rubber farmers are currently still plagued by rubber prices that have fallen to six-year lows due to reduced rubber demand from China, the world's largest rubber importer.
Indonesia’s export of natural rubber is forecast to reach 2.58 million tons in 2015, roughly similar to this year’s expected export performance but a 10 percent decline from the country’s rubber export in 2013. This year, local rubber companies have been negatively affected by sluggish global demand triggering international rubber prices touching three-year lows. Rubber production in Indonesia in 2014 is expected to reach 3.5 million tons, of which 90 percent is exported abroad (mostly to the USA, Japan, China, India and Brazil).
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In late 2014 Indonesian rubber producers and exporters were not amused when the government of China decided to approve a new standard for compound rubber imports. The permitted crude rubber content in imported compound rubber was cut from 95-99.5 percent to 88 percent, meaning that compound rubber imports into China became subject to a 20 percent import duty (the same tariff as natural rubber import duties). China’s new policy is a blow to its rubber suppliers, which include Indonesia, Thailand, Malaysia, and Vietnam.
Thailand, Indonesia and Malaysia, the world’s three largest rubber producing countries (accounting for about 70 percent of total global natural rubber output), have agreed to avoid excessive natural rubber supply on the international market by limiting their rubber exports. The countries also agree to curb new rubber plantation development as well as to spur domestic rubber consumption in each country. This statement was read out by Douglas Uggah Embas, Plantation Industries Minister of Malaysia, in Kuala Lumpur today (20/11).
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