Tyre produced at the Southern Rubber Industry Joint Stock Company in Dong Nai province (Photo: VNA) Hanoi (VNA) - Although Vietnam is the world’s third largest exporter of naturalrubber, businesses still have to import rubber raw material to meet the demandfor production and processing.
According to the Vietnam Rubber Association (VRA), most of the materials areimported for re-export and only partly meet the needs of local tyremanufacturers.
Most of the imported rubber materials are TSR 10 and TSR 20, which are in hugedemand by tyre companies but are only produced locally in small quantities dueto low prices.
Nguyen Dinh Dong, deputy general director of the Southern Rubber Industry JointStock Company (Casumina), said 75 percent of Casumina’s input is domesticnatural raw materials. It has to import the rest from Malaysia or Thailand toproduce high-grade steel belted tyres.
According to Dong, there is also a difference in quality between the SVR 10 andSVR20 made in Vietnam and those produced in other Southeast Asian countries.“This is also the reason we import TSR10 and TSR20 to produce steel beltedtyres.”
On the other hand, most rubber raw material factories in Vietnam have lowcapacity and do not meet the requirements of quality uniformity.
Da Nang Rubber Joint Stock Company (DRC) also needs about 18,000 tonnes of naturalrubber annually, mainly SVR10 and 20, but often is unable to find sufficientdomestic supply.
Thai Hong Khang, Director of the Rubber Technology Centre at the VietnamRubber Research Institute, attributed the shortage to the way domestic rawmaterial producers do business. “When global rubber prices soar, raw materialsuppliers are often concentrated entirely on exports, but when prices dropsharply, they then turn to the domestic market.”
This frustrates domestic tire manufacturers who then prefer imports that theycan obtain quickly, Khang said.
According to Tran Thi Thuy Hoa, head of the VRA rubber development consultancy,SVR 10 and SVR 20 only account for about 15-17 percent of local demand, whilethe actual demand is up to 65-70 percent.
Domestic raw material producers only focus on producing high-end premiums, suchas SVR3L, SVR-CV 50, SVR-CV 60, with little attention paid to the SVR10 and 20production line.
VRA statistics show that from 2016 to date, the price of SVR10 has been 40-220USD per tonne lower than the price of SVR3L.
Therefore, investment in SVR3L production yields higher profits.
However, market demand is tilted towards SVR10 and SVR20. In the tyre industry,SVR 3L is mainly used to produce tubes, but the market is now favouringtubeless tires, thus sales of SVR 3L are difficult.
Global forecasts also put the demand for natural rubber at 15 million tonnes,only 150,000 tonnes of which are SVR 3L.
If businesses do not reduce SVR 3L output and keep investing in expandingproduction, they will face the risk of an excess supply of 300,000 tonnes.
Realising the trend, some enterprises have started to invest in new SVR 10, SVR20 rubber production lines instead of SVR 3L. Tran Thanh Phung, deputy generaldirector of the Phu Rieng Rubber Company, says the company has invested in aSVR 10 production line and is supplying raw materials for big tire companiessuch as Goodyear and Kumho.
However, the SVR10 output accounts for only 20-25 percent of the firm’s totaloutput. Adding lines to increase SVR10 and SVR20 output to meet market needswill be weighed against prospects of ensuring profit in the future, Phung said.
Experts say investment in new production lines for SVR10 and SVR20 rubberrequires enterprises to adopt new business strategies to reach the market.-VNA
VNA
