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Rubber Products Industry Needs Support For Further Growth

5 February 2015 04:25 am - 0     - {{hitsCtrl.values.hits}}

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Within a relatively short period, the Sri Lankan rubber products manufacturing industry has successfully evolved from a relatively small and unknown entity and has become a reputable major world supplier of quality rubber products.



Sri Lanka has the potential to be one of the world leading rubber product manufacturing countries due to its production of highquality raw materials, top quality grade of NR with a very low level of proteins, highquality production of RSS and relatively low processing cost. A wide variety of rubber products is currently manufactured by the rubber manufacturing sector in Sri Lanka.


Surgical, household, agricultural and examination gloves, balloons, hallowing masks and rubber toys are among the major products manufactured by the latex industries in Sri Lanka.

The latex industry has expanded significantly over the last decade and presently it attributes to around 35 percent of the local consumption of natural rubber (NR). We have many leading rubber product manufacturers in the country whose products are very competitive in global markets. Some of them are Ansell Lanka (Pvt.), DSI Group, Loadstar Ltd, Hanwella Rubber Products Ltd, Lalan Group, Dipped Products Ltd, Trelleborg (Pvt.) Ltd, Associated Motorways Ltd, Richard Peries Group, etc. Loadstar has recently introduced some innovations in its manufacturing technology by linking nanotechnology.

In terms of export value, the rubber products industry (tyres, tyre cases and tubes, plates, sheets and strips, surgical gloves and other gloves, floor coverings and mats, etc.) recorded a high growth, from US $ 480.2 million in the year 2007 to US $ 814.4 million in the year 2012 (Table 1) .

Therefore, continued efforts at value addition should be made in Sri Lanka, thereby transferring rubber from a commodity to an industrial product. If an earnest effort is attempted in this direction, Sri Lanka could also become a leading exporter of NR-based products.

Support
The rubber products industry will need to diversify further, emphasising on high value-added and high technology rubber products, such as products for engineering, construction and marine applications. More research and development (R&D) efforts need to be undertaken in product development and downstream activities.

New areas for promotion should include the extraction of biochemical products from latex using biotechnology. These efforts will ensure the continuous improvement in the product quality to maintain competitiveness in the export market.

The government should continue to promote the development of Sri Lanka’s resource-based industries to diversify the country’s sources of growth. In addition to fiscal incentives, which are made available for promoted products and activities, the government should further fine-tune the incentives to promote specific activities among which is the rubber products industry. To further encourage investments in resource-based industries, local companies in the rubber industry that reinvest to expand their projects should be made eligible for further Investment Tax concessions.

Therefore, rapid expansion of the rubber products industry can only be achieved by implementing several factors such as wellplanned and focused industrial growth strategies, unfailing government commitment, political and economic stability, stable infrastructure, forward-thinking government policies, a large pool of well-trained local work force, a pragmatic R&D policy as well as technical and product-testing support.



In line with this aspiration, the industry should continue to intensify its R&D efforts to give emphasis to the downstream, value-added sector. Selected areas of R&D in the upstream should continue to be emphasized in order to maintain the industry’s competitiveness.

In addition, as one of the world leaders in R&D of NR, the Rubber Research Board (RRBSL) should continue to be a resource centre for the supply of trained, experienced and highly qualified manpower for the rubber industry, especially the downstream rubber products sector. Research should also develop low-tech cost-effective products for value addition by small/medium enterprises themselves.

The RRBSL should in collaboration with the industry continue to conduct training to fulfil every requirement of the NR industry, including plantation and industrial courses as well as transfer of technology to entrepreneurs on the manufacturing of rubber products. In order to address the issue on tapper shortage, concerted efforts should be made to train youngsters, whether they are from plantations or in the villages in the plantation areas, does not matter, and offer an attractive remuneration package for them to function as tappers.



Background
World production of NR is dominated by Asia. In 2013, the world NR production rose to 12,079,000 tonnes and the Asian share increased to about 93 percent (93 percent). At global level, India continues to be the leader in land productivity, with a yield of 1,639 kg/ha, followed by Vietnam with 1,740 kg/ha and Thailand with 1,808 kg/ha. Sri Lanka’s yield remains at the fifth position with 1,247 kg/ha (Table 2), which is expected to increase further by the year 2023. Most of the NR production in Asia is accounted for by smallholders (Thailand, Malaysia Indonesia and Sri Lanka amounted to 95 percent, 90 percent 85 percent and 75 percent, respectively) whilst relatively large, state-owned plantations dominated in China, Vietnam and Cambodia.

Sri Lankan production and productivity figures quoted by MPI, IRSG and ANRPC had been in dispute for some time. But now they appear to be stabilizing at much lower level, yet looking unrealistic.

Land extent
The large differences in NR production between countries are attributed t o t he differences in land extents. The land extent in 2013 in Indonesia was reported to be 3456,000 ha, Thailand 2765,000, China 1070,000 ha, Malaysia 1023,000 ha, Vietnam 834,200, India 737,000 ha and Sri Lanka 132,200 ha.

In Sri Lanka currently there is 132,200 ha under rubber of which the area in tapping is 108,000 ha. In 1970, the area under cultivation had been 200,000 ha, which declined significantly to 115,300 ha in the year 2004 and thereafter marginally increased to 124,300 ha in 2009 and now to 132,200 ha.

Rubber in traditional areas has already reached a level of saturation and the scope for further expansion in these areas is very much limited. Therefore, it has become necessary to look for new alternate locations. As per Sri Lankan agro-ecological classification nontraditional areas include parts of low/mid country intermediate and dry zones that would be suitable.

NR consumption
World NR consumption is being dominated by China with 3602,000 mt, followed by India with 957,000 mt and Japan with 765,000 mt, with of a total of 5,324,000 mt out of the world consumption of 10,924,000 in 2013, about almost 50 percent of the total consumption of world NR production and consumption forecasts indicate a production of 15,468,000 mt and 15,447,300, respectively by the year 2022 and 22,125,600 and 20,916,100 mt, respectively by the year 2031. An increasing trend in production over consumption has been forecast.

World SR production is forecast t o increase to 19,327,100 mt by 2022 and to 24,816,300mt by the year 2031, from 15,115,000 mt in 2011 and consumption from 14, 926,000 mt in 2013 to 19,392,000 mt by 2022 and 25,052,800 mt by 2031 .

Sri Lankan scenario
The gap between NR production and consumption in Sri Lanka had been almost 30 percent in favour of production in 2013; however, this gap appears to be showing signs of narrowing, with consumption exceeding production. Also, NR consumption in 2012 was 110,000 mt but in 2013 it came down by 2.5 percent to 107,300 mt.

The NR industry therefore needs a dynamic national NR production plan to ensure its long-term viability and to meet the growing demand of the domestic rubber products sector which is currently reeling under insecurity of NR supply. In order to ensure the long-term viability of the natural rubber industry in the country, a Rubber Master Plan was prepared some time ago, the fate of which is still unknown. It proposed strategies to ensure long-term viability of the natural rubber industry to meet with the growing demand.

Technologies were also proposed t o enhance total NR production by the year 2023 (10 years) and by the year 2031 (years), from its present level, which is now estimated as 116,000 mt, and to bridge the yield gap between the current national yields of about 1222 kg/ha and the achievable national yields of 1550 kg/ha by the year 2023 and more by the year 2031.

However, the risks i nvolved in reaching the expected targets by 2023 and 2031 would be influenced by market demand, climate, unstable NR prices, crude oil prices, SR supply/demand equation, currency fluctuations, economic and political instability, natural and human induced calamities, policy implications, etc.

NR prices
Prices at the Colombo auctions have been fluctuating widely due to many controllable as well as uncontrollable factors. Although having recovered from the recession, the prices were very attractive in 2010, which trend continued into early 2011, but subsequently, the prices came down to around Rs.350-375 in the latter part of 2011 and continued to slide further in 2013 and 2014, a situation very much favourable for NR consumers (Figures 1 and 2).
Revised strategies

We should now lay down revised strategies for the local rubber industry. The strategies will sustain the current developments in the local rubber industry, which has shown tremendous growth, encompassing both in the rubber upstream and downstream sectors, over the years.
Under the upstream sector, the major areas, which should be continuously developed, are the declining NR production and the domestic low productivity.
The upstream NR sector has contracted in size, especially in the estate sector as investors shifted t heir i nvestments t o ventures that indicated better profit potential.

It is observed that despite efforts to improve productivity, output for NR still declined by 8 percent to 9 percent in 2012 owing to unfavourable weather conditions.

In the near future, we do not see any indication that production will pick up, considering that harvest has also been adversely affected by unstable NR prices, adverse weather, unskilled tapping, etc.



Moreover, it said that productivity still remains low due to a still persistent use of old and low-yielding clones, ageing smallholders that do not comply with good agriculture practices, unskilled harvesters and low adoption of latest latex harvesting technologies.

Strong demand for nitrile gloves are projected to continue to overtake latex rubber gloves in terms of market share, owing to the price competitiveness of nitrile gloves as they are a premium substitute for latex powder-free gloves.

Strict compliance to environmental regulations is also a major issue amongst industry players. The rubber i ndustry, particularly the midstream sector, is constantly facing i ncreasing stringent environmental regulations due to global trends towards environmental awareness and conservation.

Despite an expected rise in production of NR in the future, the forecast for the next 20 years indicate Sri Lanka’s contribution to world production to continue to be less than 2 percent (Source; Sajeep Sankalpa (2015), Personnel communication, RRISL). (N. Yogaratnam can be contacted at treecrops@gmail.com)
 
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