Trends may change for Thailand's rubber industry

Commercial-scale rubber cultivation began in Thailand in the early 1900s, making the widely-demanded crop one of the first valuable agricultural exports for the country. Rubber farms initially proved to be an efficient supplier of raw product, readying it for shipping for further processing abroad. Over time, the sector continued to expand, both in terms of natural rubber production and in downstream processing applications, to become the world’s premier manufacturer and exporter of rubber products.

Current State

Thailand produced approximately 4.5m tonnes of rubber in 2015, accounting for 36% of worldwide output on the year, and exported 3.7m tonnes. Poor weather hindered output in 2016, which declined to 4.3m tonnes, but the industry retained its top spot among global producers. Output is cultivated almost entirely by small-scale farmers who sell the raw rubber to a myriad of major multinational companies that have set up industrial bases in the country, including many of the world’s tyre manufacturers and rubber glove makers. Complementing the natural rubber industry, Thailand is also growing its synthetic rubber segment, which produces materials that can be substituted for a portion of true rubber used in tyres and other products. While many major synthetic rubber producers operate in the country, domestic production capacity remains far below local demand levels, leaving imported goods to make up the difference.

Manufactured export products totalled BT136.4bn ($3.8bn) in 2016, up from BT72.7bn ($2bn) recorded in 2006. These finished goods do not include raw bulk rubber output, which accounted for another BT155.74bn ($4.4bn) worth of exports in 2016. Although these receipts rank among the most lucrative agricultural and agro-industrial exports for Thailand, the earnings remain far lower than in previous years in spite of increased production. This is due to lower global demand and surplus stock pulling down the price. During the booming demand years of the early 2010s, rubber agriculture exports peaked at BT382.9bn ($10.8bn) on shipments of 3m tonnes, while manufactured rubber product exports reached an all-time high of BT156.33bn ($4.4bn) in 2012. Tyres are the number one rubber-based export from Thailand in terms of both value and quantity, with tyre producers accounting for roughly half of domestic rubber consumption in 2015. Elastics manufacturers were the next-largest consumers at 15% of domestic demand, followed closely by rubber gloves (14%), motorcycle tyres and tubes (7%), and rubber bands (4%).

Synthetic Rubber

Although Thailand’s extensive rubber cultivation capabilities and well-entrenched downstream manufacturing industry face little imminent threat of being unseated as the world’s top exporter by other rubber-producing nations such as Indonesia and Malaysia, evolving technology of synthetic rubber could pose a longer-term threat to the local industry. Using current processes, synthetic rubber remains unsuitable for many products and must often be blended with natural rubber to produce an acceptable quality for many goods.

However, the sustained softening of oil prices has made the feedstock for this alternative less expensive, and companies in China are hoping to take advantage of this by developing technology that enables synthetic rubber to replace natural rubber in the production of car tyres. If successful, these efforts could have a lasting effect on the rubber industry. The consumption of synthetics has already expanded steadily over the past decade and accounted for around 60% of total rubber consumption in 2015.

While the impact of this trend will be seen in the long term, the Thai government is taking more immediate measures to bolster the industry through a new Rubber City Industrial Estate located in the southern province of Songkhla. The 194-ha site will offer financial incentives and is expected to serve as the hub for companies involved in midstream and downstream industries.