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Rubber prices sag under pressure

Sok Chan / Khmer Times Share:
A worker collects latex from a rubber tree in a plantation. Uncertainty in the global economy has influenced the price of natural rubber. Reuters

The slowdown of regional and global economies, especially in China, US dollar appreciation, unfavourable weather and global stock market speculation have plunged rubber prices, the Association for Rubber Development in Cambodia said.
Association secretary-general Men Sopheak said yesterday that the price on the global market had dropped to between $1,600 and $1,700 per tonne from $2,400 in January and February.
“The price plunge was due to the regional and global economy, political issues around the world, the slowdown of the Chinese economy, speculation from investors in the stock market and US dollar appreciation,” Mr Sopheak said.  
Lim Heng, vice president of An Mady Group, also said that uncertainty in the global economy had influenced the rubber price.  
He added that the surplus of rubber in Thailand and tensions between North Korea and the United States had led to price fluctuations of natural rubber.
“Now we cannot predict what the rubber price will be,” Mr Heng said.
There is a risk for families running rubber businesses but companies are battling the cost base. “However, we can still benefit with the current price,” Mr Heng added.
According to the Association of Natural Rubber Producing Countries reports of future oversupply arising from the large-scale planting programmes undertaken seven years ago in the Asean region has also affected sentiment in the natural rubber market.
Pol Sopha, director-general of the rubber directorate at the Agriculture Ministry, was optimistic that the price would recover soon when the supply of rubber on the global market was cut and China started buying rubber after a long break.
“According to the prediction of international organisations such as the International Monetary Fund, the World Bank and the UN Food and Agriculture Organisation, the price of natural rubber will rise to about $2,200 per tonne,” Mr Sopha said.
“If the global economy improves and oil price rises it is good for rubber.” he added.
Mr Sopha said that Cambodia mostly exported rubber to Vietnam, Malaysia, Singapore and China. Cambodia would also look at the Chinese market, he added, because it had huge potential.
Mr Heng said that government should cut the rubber export tax to make exports competitive and draw more foreign direct investment into the natural rubber sector.
“We want the rubber export tax to be revised to zero if the total export price is below $1,500 per tonne changing it from the ceiling of $1,000 per tonne,” he told Khmer Times.
At present, the government levies $50 in tax duty per tonne of rubber exported if the price is from $1,000 to $2,000 per tonne and $100 of tax duty per tonne of rubber if the export price is above $2,000 per tonne. It takes zero tax if the price is below $1,000 per tonne.
“Neighbouring countries don’t tax their rubber exports, so why are we doing it?” asked Mr Heng.
“If there are measures taken by Asean rubber associations and the government considers cutting the export tax, the price could rise to about $2,500 to $2,700 per tonne and more investors would come to Cambodia.”
Land for cultivating rubber has also increased to about 437,000 hectares, 64 percent of which is controlled by rubber industry firms and the rest by family-run operations, according to the Agriculture Ministry.
Cambodia exported about 50,000 tonnes of rubber for the first quarter of this year.

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