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Logo of Phnom Penh Post newspaper Phnom Penh Post - Rubber prices rise but remain down on 2008

Rubber prices rise but remain down on 2008

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Rubber plantations have seen prices fall in the past year, but in the first half prices began to recover, new figures show.

Price of $1,633 a tonne at end of June is up on January but down 50 percent from the end of the second quarter last year

THE price of rubber has risen slowly this year, but is still just half the figure reached at the end of the first quarter last year, the latest figures showed.

The government and one of the country's largest producers blamed the effects of the global economic crisis on the stagnant vehicle market for depressed prices.

Ly Phalla, director general of the rubber plantation department at the Ministry of Agriculture, Forestry and Fisheries, said rubber sold for US$1,633 per tonne at the end of June, half of what producers earned at the same time last year.

"The drop is due to lower global demand by the tyre industry, which has cut production because of the global economic crisis," Ly Phalla said.

But, he added, business is still good since rubber costs around $600 per tonne to produce, leaving room for healthy margins.

Ly Phalla said the Kingdom exported more than 40,000 tonnes of rubber last year, with Vietnam and China its largest markets.

Ministry statistics showed the price of Standard Malaysian Rubber (SMR) has climbed steadily this year. SMR sold for $1,419 per tonne in January 2009, and traded at $1,633 last month. But that is sharply down on last year: In January 2008, SMR cost $2,551 per tonne, rising to $3,138 per tonne by June 2008.

"If the price drops to less than $1,000, then that can affect producers," said Ly Phalla. "But the rubber price often drops at the beginning of the year, and usually rises by year-end."

Dr Yaing Sang Koma, president of the Cambodian Centre for the Study and Development of Agriculture (CEDAC), an agricultural NGO, said rubber exports are essential to economic development, with the industry a significant employer.

"Although the rubber price on global markets is down from last year, that won't damage most producers since the majority are small-scale farmers who operate their own plantations - and they have lower costs as they don't hire workers," he said.

However, Yaing Sang Koma said larger producers would be affected since they have higher production costs, and that means margins are already lower.

Mak Kimhong, director general of the Rubber Plantation Association and owner of the Chup rubber plantation, which has 7,000 hectares of rubber-producing trees, said lower prices meant he was unable to increase the salaries of his 4,000 workers to match their rising cost of living.

Mak Kimhong said his firm exported 3,000 tonnes of rubber to Vietnam and China this year and blamed the price slump on the global economic crisis.

Figures from the Council for the Development of Cambodia (CDC), the government body created to encourage domestic investment, showed the Kingdom wants 150,000 hectares under rubber cultivation by 2015.

CDC figures reveal that 42,000 hectares were approved as rubber concessions in the first four months of this year, and those seven projects have a proposed investment value of $146 million and will employ 9,000 workers. Last year, there were just four approvals worth $31.5 million for rubber plantations.

Pan Sorasak, a secretary of state at the Ministry of Commerce, said there are now 80,000 hectares of rubber plantations with mature trees, which are at least six years old. He said 350,000 hectares are suitable for rubber, but are yet to go into production.

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