Indonesia Aims Stronger Ties with Thailand to Bolster Rubber Prices
Jakarta. Indonesia is seeking to partner with fellow rubber producer Thailand as the country grapples with plummeting prices and the European Union's rollout of an anti-deforestation law.
Rubber trade was high on the agenda during Trade Minister Zulkifli Hasan’s recent meeting with Thai House Speaker Wan Muhamad Noor Matha.
According to Zulkifli, Thailand and Indonesia are the world’s top two rubber-producing nations. However, problems come one after another: starting from the falling prices of rubber to the commodity being subject to the EU Deforestation-Free Regulation (EUDR).
“Thailand and Indonesia are the world’s leading rubber producers who are facing similar situations due to the global natural rubber prices that continue to fluctuate over the past decade,” Zulkifli was quoted as saying in a recent press statement.
Zulkifli said that rubber prices had been witnessing sharp declines. As of August 9, rubber prices stood at $133.36 per kilogram. The minister added that rubber leaf fall disease also dealt a fatal blow on the production, making it difficult to propel prices to a remunerative level.
Dropping prices might prompt the rubber farmers to shift to other commodities. This may result in a tight supply of natural rubber in the future, according to Zulkifli.
He also called for collaboration between the members of the International Tripartite Rubber Council (ITRC), namely: Thailand, Indonesia, and Malaysia. The council, which accounts for 58 percent of global rubber production, pursues fair and remunerative prices for the smallholders.
The council has a number of instruments to keep prices in check, among others, the agreed export tonnage scheme (AETS) that puts a cap on rubber exports. Other instruments include the supply management scheme (SMS) and a demand promotion scheme (DPS) aimed to boost the domestic consumption of rubber.
“The ITRC also works alongside other rubber exporters, including Vietnam and the Philippines, to drive up prices,” Zulkifli added.
In 2022, Indonesia was the world’s second-largest rubber producer after Thailand, representing a market share of 21.57 percent. Indonesia exported $3.66 million worth of natural rubber in 2022, marking an 11.35 percent decline from $4.12 million recorded the previous year. Indonesian exports of natural rubber have been on a downward trend of 1.4 percent in 2018-2022, the Trade Ministry reported.
Rubber -- along with palm oil -- are among the commodities that the EUDR regulates. In other words, exporters have to prove their rubber does not come from deforested land if they wish to enter the EU market.
Indonesia has been trying to soften the EU’s stance, although its negotiations put a higher emphasis on palm oil. Indonesia, fellow palm oil producer Malaysia, and the EU recently agreed to set up an ad hoc joint task force to identify practical solutions to the EUDR’s implementation.