Monday , August 2 2021

Thai rubber farms stretched as US-China trade war saps demand

In this picture taken on October 17, 2018 a woman taps a tree to harvest latex at a rubber plantation in Rayong Province. // AFP PHOTO

Thai latex makes everything from tires and condoms to baby pacifiers and surgical gloves, the country of endless acres across the fruit of the rubber trees.

But the rubber trade is on a crossroads as a bitter dispute among the world's two largest economies richestts across Southeast Asia with unexpected consequences.

Countries like Vietnam are benefiting as manufacturers migrate from China to avoid punishing tariffs on exports to the US.

But in Thailand, the price of rubber has slumped from twenty percent since June, as those same tariff bite hard on demand from factories in China – the market for more than its latex exports.

Some of Thailand's rubber workers are being forced to abandon their plantation jobs for factory work.

"I could not feed my children anymore," said Annita, who used to work 10 hours a day in harvesting latex in Chiang Rai, Northern Thailand, making just $ 7 a day, less than the minimum wage and half the going rate several years ago .

So she has taken a job in a packing plant earning around $ 9 daily.

"Nobody want to stay. The plantation owner can not find workers anymore – the work is too difficult for the wages," she told AFP.

While the plight of US soybean farmers hit by the tariffs has grabbed the headlines – they face a 25 percent levy to access China, the world's biggest soybean market – other troubles are quietly brewing across the world.

The bottom has fallen out of the once-booming industry as Thai rubber prices plummet to about $ 1.21 a kilogram – they were five times that in 2011

Too much rubber –

Around one third of all the rubber in the world comes from Thailand's forests, where latex is harvested at night or before on by tappers who make an incision and collect the sap as it bleeds out.

In this picture, on October 17, 2018 a worker transports raw rubber sheets at a factory in Rayong Province. // AFP PHOTO

The country currently produces about 4.6 million tons of rubber a year and the sudden drop in Chinese demand is a long term global oversupply crisis to push prices off a cliff.

"A climate of uncertainty" pervades the industry after US tariffs hit nearly half of all Chinese imports, according to Karako Kittipol, marketing manager at Thai Hua Rubber.

"Chinese companies do not want to have too much rubber in stock," he told AFP.

The value of the yuan against the US dollar has also dipped, making more expensive for Chinese manufacturers.

Thailand is a bystander in the trade war between the world's two largest economies.

But the ruling junta is trying to address the supply-side issues and is aiming to reduce the area under cultivation for more than 60,000 hectares per year over the next five years.

– 'Not the right solution' –

At the same time, the rubble remains in Thailand.

In this picture taken on October 17, 2018 workers clean raw rubber sheets at a factory in Rayong Province. // AFP PHOTO

Farmers and tappers – the majority of who come from the junta-aligned south – are not so fortunate enough to protest when times get tough.

So the government last week stumped up an initial handout – capped at roughly $ 700 per plantation — to ease their immediate pain.

But farmers remain unconvinced.

"(It is not) right the solution," said Apichit Duangdee, who felled a third of the trees on this year.

"Very few countries can produce natural rubber. It is a rare product and the Thai government should promote it better," he said.

If it fails, the knock-on effects could be massive.

Tyre giant Michelin buys 40 percent of its natural rubber from Thailand, keeping vehicles on the road

In this picture taken on October 17, 2018 latex drips from a tree at a rubber plantation in Rayong Province. // AFP PHOTO

"If prices continue to fall, many farmers and processors will lose interest in latex and quality should fall," Lionel Dantiacq, Michelin's president for Asia and Oceania, told AFP.

"If prices go too high, the tire industry will suffer … with repercussions for the consumer."

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