A REPORT ON CHINA S NATURAL RUBBER INDUSTRY

Transcription

1 A REPORT ON CHINA S NATURAL RUBBER INDUSTRY Zhu Xiuyan, Honarary Chair, China Natural Rubber Association 地址 : 北京市朝阳区东三环南路 96 号农丰大厦 703 室 邮编 : 电话 :

2 Greetings and Congratulations.

3 1 New Challenges to Natural Rubber Industry CONTENT 2 Proposals on Possible Solutions

4 1. New Challenges to China s Natural Rubber Industry In 2014, owing to slow global economic recovery, natural rubber price continues its downward slide. China s natural rubber industry faces old and new challenges that worth close attention.

5 1. New Challenges to China s Natural Rubber Industry a. Shrink of plantation areas. As an important chemical raw material, natural rubber is sensitive to changes in industrial demand and market expectations. From 2002 to 2011, the rising rubber price lead to a expansion in rubber plantation areas, growing from 9.46 million acres to million acres. However 3 years of downward spiral in rubber price has result in the shrinking of rubber plantation. In 2014, plantation areas are estimated to shrink by 3.1% to 16.6 million acres.

6 1. New Challenges to China s Natural Rubber Industry Attributing factors: Poor infrastructure Lack of early stage investment Falling prices. As of 2013, 7 million acres of rubber plantation were still being cultivated without any output yield. Rubber price entered the downward spiral in 2011, making it hard for the farmers to maintain the farms. Owing to lack of input, 60% of the newly bred rubber trees need 10 years before they can be tapped, lower than the 7 year national standard. Some rubber plantations were given up.

7 1. New Challenges to China s Natural Rubber Industry b. Severe Decrease of Tapping Areas. By 2013, China has million acres of tapping farms, up 3.8% yoy. Given the current speed, there should be 500 to 600 thousand acres of newly yielding rubbers each year, with an annual output increase of thousand tons. However, since rubber prices keep falling, the plantations now lose RMB 8000 for each ton of rubber produced. As a result, many rubber farmers have given up the industry, many companies are seeking M&As and there has been severe decrease in rubber tapping. Nong Ken farm has lost 10% of its farmers and Haijiao Group, which account for 50% of the local production is planning to close some of its plantations in 2014.

8 1. New Challenges to China s Natural Rubber Industry C. Rubber production is subject to natural disasters. China s rubber production areas often encounter typhoons and cold currents. More than 15% of the production is lost due to bad weather, diseases and insects. In 2014, plantations in Guangdong has postponed tapping season for a month. The rubber plantation area is estimated to decrease by over 3%, with a drop of 9-14% in output. In addition, weather forecast indicates stronger typhoons this year.

9 1. New Challenges to China s Natural Rubber Industry Therefore, although the total NR output reached 860 thousand tons in 2013, and 48 thousand more acres of rubber trees start to yield this year the total NR output in 2014 is estimated to be 740 to 780 thousand tons, 9 to 14% lower yoy.

10 1. New Challenges to China s Natural Rubber Industry d. overseas rubber plantation companies also endure hardships. i. Lack of policy ii. Lack of national treatment in the case of imported sales. iii. Political risks.

11 1. New Challenges to China s Natural Rubber Industry e. Low price in global market impacts China s NR industry. i. NR import has created over supply in the Chinese market. In 2010, there was a 15.5% oversupply, in 2011, 19.4%, in 2012, 21.5% and in 2013, 31.9%. Since 2014, there has been an excessive increase in NR import as of March, 1.16 million tons has been imported, up 17.3% yoy. This has led to the drop of NR price and huge inventories of local NR companies.

12 1. New Challenges to China s Natural Rubber Industry ii. Lack of quality standard for imported compound rubber has doubled the impact on China s NR industry. Compound Rubber contains % NR, but is imported under a different tax category, subject to lower tariffs and VAT, and severely impacts China s NR industry. Customs data indicates that since 2009, when tariffs were removed from compound rubber imported from ASEAN countries, the volume of imported compound rubber shot up from 280 thousand tons to 500 thousand tons, and reached 1.54 million tons in This is a strong blow to the domestic NR industry.

13 2 Proposals on Possible Solutions In April 2014, China s Ministry of Agriculture submitted to the State Council a Report on the current situation of the NR industry.

14 2 Proposals on Possible Solutions The solutions we propose: a. Reinstate import tariffs on nature rubber. To protect China s NR industry, temporary tariffs that hinge on volume or price should give way to normal legal tariffs, levying 10% on natural latex, 20% on natural rubber smoked sheet (RSS) and other NR products.

15 2 Proposals on Possible Solutions b. compound rubber with over 70% of NR mix should be categorized into NR products, which is subject to technical standards and tests.

16 2 Proposals on Possible Solutions 3 The practice of collateralizing imported nature rubber for bank loans should be better regulated. Relevant state authorities should reform the collateralizing mechanism and regulate the practice of collateralizing imported NR for loans.

17 2 Proposals on Possible Solutions d. give greater support to domestic NR industry, for its sustainable development. I. subsidize the NR industry and set RMB 18000/ ton as bottom-line price.

18 2 Proposals on Possible Solutions ii. Use Trade Laws to resolve the dumping of NR by some producing countries. iii. Set up a national fund for NR industry, increase allowances to cover more chains of the industry, and subsidize production companies and NR farmers.

19 2 Proposals on Possible Solutions iv. Set up natural disaster compensation mechanism for the NR industry. Cover the industry with insurance. v. Domestic NR companies operating in foreign countries should be given incentives and exemption of import tariffs.

20 2 Proposals on Possible Solutions The above proposals, if implemented, will build up more capacity in China s NR industry, reduce production cost and realize sustainable development.

21 T h a n k s