New impetus for rubber industry

09:25 | 18/08/2015 Trade

(VEN) - Prices for natural and synthetic rubber prices during the first six months of the year have been at lower levels compared with the same period last year, offering domestic rubber product manufacturers favorable conditions. However, rubber exports decreased due to unfavorable changes in traditional markets.

New impetus for rubber industry

Tightening management over imports

According to the Vietnam National Chemical Group, the production value of the rubber sector reached an estimated VND2.16 trillion in the second quarter of this year, a rise of 17.6 percent compared with the same period in 2014. In the first six months, the figure reached an estimated VND3.89 trillion, up 11.5 percent compared with the same period last year. The sector’s revenue reached an estimated VND2.51 trillion in the second quarter, up 27.7 percent, and nearly VND4.2 trillion in the first six months, up 17.8 percent. 

Rubber product manufacturers had to cope with downward pressure on prices, especially for tires and tubes, in both domestic and export markets. Tire and tube prices have decreased by 5-12 percent compared with the first half of 2014.

Domestic tire and tube manufacturers also had to cope with smuggling and fraudulent trade. For example, about 1.5 million Chinese tires are imported into Vietnam annually but importers declare their prices to be just 30 percent of their production costs, causing losses of more than US$75 million to the state budget due to lower tax payments compared with the amounts that actually have to be paid.

Moreover, domestic tire manufacturers were offered less preferences compared with Chinese businesses. While Chinese tires were just subject to an import tax rate of 15 percent and a 10 percent VAT, domestic businesses had to pay both input and output VAT.

The declaration of lower prices compared with production costs caused losses for domestic manufacturers. Domestic products are of good quality but sell slowly even at competitive prices because Vietnamese importers declare lower prices to evade taxes. For this reason, domestic rubber product manufacturers have proposed tightened management over imports to prevent fraudulent trade and create a fair playing field for domestic businesses.

Exports decrease

Despite favorable conditions, rubber exports in the first half of this year partially decreased due to objective reasons. In the second quarter, Vietnam exported US$17.7 million worth of rubber products, down 3.4 percent compared with the same period in 2014. In the first six months, the export value reached an estimated US$31.15 million, down 1.9 percent compared with the same period last year.

Due to prolonged conflict, the Southern Rubber Industry Joint Stock Company (Casumina) cannot maintain exports to Yemen (in the past, exports to Yemen brought the company about US$4 million annually). Meanwhile, exports to other traditional markets such as Laos, Cambodia, Singapore, and Malaysia have been stable. The export volume did not increase compared with the first half of 2014 but the export value declined due to price falls. Tire and tube exports to the Middle East are forecast to continue facing numerous difficulties due to the war.


Thanh Ha