Rubber (Natural)

Rubber, known for its elastic quality, is a commodity that is used in many products and applications around the globe (from industrial to household products). There are two types of rubber, to wit natural rubber and synthetic rubber. Natural rubber is made from the juice (latex) of the rubber tree, whereas the synthetic type is made from petroleum. Both types are able to replace each other and as such influence each other's demand; when the price of petroleum rises, demand for natural rubber will increase. But when supply disruptions of natural rubber cause its price to go up, the market turns to synthetic rubber. This section discusses natural rubber as Indonesia is one of the largest producers and exporters of this type. The rubber tree needs constant high temperatures (26-32 degrees Celsius) and a wet environment in order to be most productive. These conditions are found in Southeast Asia where most of the world's rubber production is produced. Around 70 percent of global production comes from Thailand, Indonesia and Malaysia. It takes seven years for a rubber tree to reach a productive age. Hereafter, it can produce up to 25 years. Due to the long cycle of the tree, any short term supply adjustments can not be made. Top Five Natural Rubber Producers 2011
1. Thailand 2. Indonesia 3. Malaysia 4. India 5. Vietnam 3,348,900 3,088,400 996,673 891,344 811,600

in tonnes Source: Food and Agriculture Organization of the United Nations

Natural Rubber in Indonesia

Production and Export of Indonesian Rubber As the second-largest rubber producer, Indonesia supplies a substantial amount of rubber to the international market. Since the 1980's, the Indonesian rubber industry has shown a steady increase in production. Most of the country's rubber production - around 80 percent - is accounted for by smallhold farmers. Government and private estates thus play a minor role in domestic rubber production.

Most of Indonesia's rubber production stems from the provinces: 1. South Sumatra 2. North Sumatra 3. Riau 4. Jambi 5. West Kalimantan

The total size of Indonesia's rubber plantation area has risen steadily during the last decade. As prospects of the rubber industry are positive, there has been a shift away from commodities such as cocoa, coffee and tea, in favour of the establishment of palm oil and rubber plantations. Smallholder rubber estates have increased, while government and private rubber estates have shown a slight decrease, probably due to a shift in focus to palm oil. Around 85 percent of Indonesia's rubber production is exported. Almost half of this export is shipped to other Asian countries, followed by North America and Europe. The top five Indonesian rubber importing countries are the USA, China, Japan, Singapore and Brazil. Domestic rubber consumption is accounted for by Indonesia's manufacturing industries (in particular the automotive sector).
2008 Indonesian Rubber Production (in million tonnes) Indonesian Rubber Export (in million tonnes) 2.75 2009 2.44 2010 2.73 2011 3.09 2012 3.04 2013 3.20

2.30

1.99

2.20

2.55

2.80

2.70

indicates a forecast Sources: Association of Natural Rubber Producing Countries, Indonesian Rubber Association (Gapkindo), and Food and Agriculture Organization of the United Nations

Compared to its rubber producing competitors, Indonesia contains a low level of productivity per hectare. This is in large part due to the general older age of its rubber trees in combination with low investment capability of the smallhold farmers.