By Mohani Niza
A large-scale flood in Malaysia, the biggest in years, have sent price of rubber surging, affecting some businesses, and not some.
The world’s largest rubber glove manufacturer, Malaysia-based Top Glove, for example, says that its business has remained unaffected by the recent floods in Malaysia that saw the price of rubber increasing.
“We expect demand to continue growing at 6% every year on the back of increasing hygiene standards and healthcare awareness, particularly in developing markets where usage is low but rapidly rising,” Top Gloves chairman Tan Sri Lim Wee Chai said in an interview with RJA.
Rubber prices surged as flooding disrupted supplies from Malaysia. In fact, it has been reported that rubber output in Thailand (another country that was affected by the floods) and Malaysia will drop at least 30% and prices have been predicted to rise further.
However, Top Glove’s top executive remained optimistic. “As an essential item in the healthcare industry, the demand for rubber gloves is generally resilient to raw material price fluctuations and economic uncertainty,” he added, noting that the price increase was still considered small compare to the past few years,” said Lim.
He also said that the company took into account the stronger US dollar. As a result, the prices of their gloves remained the same.
Furthermore, the company says it has several back-up plans if the price of rubber continues to increase, including:
The floods in Malaysia, which occur annually during the monsoon periods of November-December, saw almost 200,000 people displaced from their homes while 21 were killed in the states of Kelantan, Pahang, Perak, Terengganu and Johor, areas that are also home to rubber trees.
The floods have been described as the worst in decades. Last year also, the Southeast Asian region generally suffered from a spate of flooding after unusually heavy rainfall.
As a result, there have been damages to rubber plantations, though there are no official statistics on how many plantations exactly were damaged.
Malaysia’s Plantation Industries and Commodities Minister Datuk Amar Douglas Uggah Embas recently said that the Malaysian Rubber Board (MRB) and Malaysian Palm Oil Board (MPOB) had monitored the situation and were identifying arising issues from the tragedy.
“I have directed MRB and MPOB to monitor the smallholders who are affected by the flood and to make recommendations to the government on how to resolve the issues faced by them,” he said.
“We expect towards early in the year, the rubber stock will decrease drastically,” he added.
He also said that small rubber holders need not worry much as they can sign up for the Rubber Smallholders Transaction Authorisation Permit (PAT-G) immediately in order for them to claim compensation under the Rubber Production Incentive (IPG). IPG is a mechanism to assist smallholders during the fall of rubber prices and it started in January.
Thailand, Indonesia and Malaysia are the three largest producers of rubber, and it’s market value is estimated at US$25 billion a year.
“Both commodities are in their low production season and now that there are floods, there are concerns about supply constraints,” said Singapore-based Rabobank analyst Pawan Kumar.
Recently, Malaysian Rubber Board (MRB) Director-General Datuk Dr Salmiah Ahmad said that the natural rubber (NR) industry is expected to bounce back this year. She said this would be due to expected surge of demand by China.
“This means demand will exceed the world’s supply of natural rubber,” she said.