Indonesia's rubber industry focuses on restructuring

Indonesia is the second largest natural rubber producer in the world, and its natural rubber planting area ranks first in the world. Indonesia's natural rubber production in 2009 was 2.59 million tons, which was 5.7% lower than in 2008. At present, the focus of Indonesian rubber industry development is to adjust the structure, improve and update rubber trees, and increase domestic rubber consumption. According to Asriel, chairman of the Indonesian Rubber Industry Association, the policy of adjusting structure and limiting production cuts will continue into 2014. In addition, he suggested that the government should formulate policies to reduce the negative impact of the China-ASEAN Free Trade Area on the rubber industry.
Indonesia is the second largest exporter of natural rubber in the world after Thailand. Natural rubber exports account for about 85% of its output. The main export of natural rubber is SIR20, the proportion of standard rubber has increased year by year, as much as 95%, while the proportion of smoked rubber has decreased year by year. There are two main export methods: First, purchases by marketers in Singapore, and the implementation of Indonesian standards for product standards; second, large multinational companies directly to Indonesian manufacturers for fixed-point procurement; product standards can be provided by users, on-demand production, and protection needs. Indonesia's major exporters of natural rubber include the United States, Japan, China, Singapore, and South Korea. Data released by the Central Statistics Office of Indonesia in November 2009 showed that the country’s exports of rubber and rubber products decreased from US$532.6 million in 2008 to US$462.9 million in 2009. The Natural Rubber Producing Countries Association predicts that Indonesia's natural rubber export volume in 2010 is expected to reach 2.3 million tons.
Indonesia attaches great importance to the construction of rubber processing capacity. In the past three years, more than 20 rubber processing plants have been added to local or foreign investment. The main producing areas in Sumatra and Java have strong clusters of processing enterprises. The processing capacity of natural rubber in Palembang and Medan is more than 1.2 million tons. The scale of enterprises is large, with an annual rubber processing capacity of 20,000 to 60,000 tons, with an average of 50,000 tons/year.
Asrill said that since the global auto manufacturing industry is not expected to fully recover by 2014, Indonesia's natural rubber industry will continue to reduce production before this. The Indonesian government is trying to increase the quality of rubber in the country by limiting production. Indonesian Trade Ministry official Arif said that the Indonesian government and related industries have reached an agreement to develop higher quality standards for rubber products on the domestic market. Its main content is to reduce the content of impurities in products. When formulating new rubber quality standards, especially impurity levels, Indonesia has made reference to the corresponding standards of other countries; this will increase the competitiveness of Indonesian products. The raw rubber quality in Indonesia is stable, and is mostly adopted by large multinational tire companies such as Michelin.
At present, many farmers in Indonesia are using the opportunity to reduce their production to renovate rubber forests, cut old trees, and plant new rubber trees. This update is likely to continue until 2014, and Indonesia’s rubber production will be reduced accordingly. However, due to the full launch of China-ASEAN Free Trade Area and the rapid recovery of China's economy, the country's natural rubber production in 2010 will have an increase of about 5%, and the export volume will increase by about 10% to 2.3 million tons. While reducing production, the Indonesian government is also trying to increase the demand for natural rubber, especially to increase the domestic market's consumption of natural rubber in the country. Currently, the country only consumes 15% of its natural rubber production each year, far below Malaysia's 40%. In order to increase domestic consumption, the Indonesian government has actively developed the rubber industry, new tires, latex and other projects, and take effective measures to protect the rubber industry downstream industries such as tire manufacturing.
Asrill said that the price of tires produced in China is US$95 per article, and the tires produced in Indonesia are priced at US$127 per article. If there is no government assistance, Indonesia’s tire industry will be opened after the China-ASEAN Free Trade Zone is opened. It is difficult to compete with Chinese counterparts.
With the rising consumption in the Chinese market, Indonesia’s share of China’s natural rubber exports is also rapidly increasing. In response to China’s increase in Indonesia’s purchase of rubber and the implementation of zero-tariff in the China-ASEAN Free Trade Area, experts recommended that Chinese tire companies create conditions that mimic Michelin, direct procurement, fixed standards, and group purchases; Through a reputable and powerful marketing company, joint procurement will be implemented to allow Indonesian processing plants to process according to Chinese standards. At the same time, they can also attract Indonesian manufacturers to the market and direct supply through the established domestic trade market. Establish a new procurement system that does not pass third parties to ensure the quality and supply of natural rubber, and reduce procurement costs.

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