Rubber exporters hope US-China trade war ends soon

The trade war may adversely affect Vietnam's rubber industry

According to the General Department of Customs (GDC), in the first half of September, Vietnam only exported 77,141 tons, worth US$99.1 million, a decrease of 9.9% in quantity and 28% in value compared with the same period last year.

The figures were unsatisfactory, if noting that India’s exports increased by 46.4% in quantity and 28.9% in value in the first eight months of 2018.

Tran Thi Thuy Hoa from the Vietnam Rubber Association (VRA) said any changes in the Chinese market will affect Vietnam because the market buys 65% of Vietnam’s total natural rubber output.

To Xuan Phuc from Forest Trends also commented that if China and the US cannot find solutions to end the war, with the high tax rates the US imposes on Chinese car part exports, Vietnam’s rubber products will suffer.

Nguyen Ngoc Tuan, deputy chair of the Dong Nai provincial Import/Export Association, confirmed this, explaining that car tires are among Chinese export products that bear 10% additional tax. Making car tires is a developed industry in China which consumes high volumes of rubber.

In such unfavorable conditions, most Vietnamese rubber processing companies cannot fulfill their business plans, and have had to adjust business targets set earlier this year.

Thong Nhat Rubber JSC (TNC), earlier this year set the target of VND100 billion in revenue. However, by the end of June, it got VND33.2 billion only, fulfilling 33% of the yearly plan.

As for Phuoc Hoa Rubber (PHR), its output in the first half of the year decreased by 23.4% in comparison with the same period last year, which means that only 29% of the year plan has been implemented.

Meanwhile, the purchased volume dropped by 33.3% and the consumption volume by 30%.

Vietnam’s management agencies and VRA have recommended that rubber producers restrict the supply and suspend production expansion plans. However, the recommendation may be agreed to only by corporations or large-scale farms.

At small farms, the rubber growing area and output is increasing. Small farms make up 61.7% of total natural rubber supplies.

The current oversupply and the price reduction have had a direct impact on all the institutions and households in the supply chain, including hundreds of thousands of workers and 260,000 households.

However, analysts say the biggest worry for Vietnam is not the fall in rubber prices, but the high proportion of exports to China, which shows that Vietnam’s rubber industry relies on the Chinese market.