Thailand in limbo with US-China trade war

May 27, 2019

Thailand’s “white gold” rubber latex was once a hot commodity and made the country a globally-sought after rubber producer. But Thailand is currently caught in the aftermath of the US-China trade war, which is similarly affecting other Southeast Asian countries dependent on these two mega-economies.

While most of Thailand’s 4.5 million tonnes of rubber is exported in sheets to China for manufacture into commercial products such as gloves and car tyres, the local rubber market is in for a dramatic change as rubber prices decline – apparently by 70% already.

Thailand’s exports have to contend with ongoing US-China trade tensions, exchange rate volatility and trade policy uncertainty. Trading at only US$1,800 per tonne, Thai rubber exports in April 2019 valued at US$18.6 billion, the lowest in 24 months. Other industries are not exempt – sales of computer parts fell by 10.6%, auto parts by 4% and machinery parts by 12.3%. Thailand’s National Economic and Social Development Council (NESDC) has marked down its GDP forecast to a range between 3.3-3.8% in lieu of falling prices.

According to Korakod Kittipol, Assistant Executive Vice President of Thai Hua Rubber, any Chinese economic downfall would also affect Thailand’s trade economy. So, the sudden drop in Chinese demand after high tariffs were imposed has resulted in dismal prices and a 10.4% year-on-year decrease of Thai rubber.

A prolonged escalation of the trade war could, however, slash growth in Thai exports to less than half that of 2018 and easily nudge Thai exporters to seek alternative markets to diversify their export destinations.The Research Director at Thai’s Development Research Institute (TDRI), Kirida Bhaopichitr, thinks changes will come soon in Chinese exports, as the US and Chinese markets will impart slower/contracting demand from Thailand if their dispute continues.

Although facing tough times, Thailand’s resilient economy is expected to capitalise onthe changing supply chains along upcoming global economic faults as production and manufacturing bases relocate to Southeast Asia.

Kirida Bhaopichitr has noted that certain Chinese, American, Japanese, and South Korean companies have been steadily shifting their trading points: “Companies majoring in computer parts, auto parts, electrical appliances, and petrochemical products have seen relocation from China. So these are the sectors that are actually benefiting from the relocation from China to Southeast Asia.”

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Rubber Prices
(Last Updated: 10 June 2019)

Monthly The prices shown above do not include VAT @4% on purchase and expenses towards packing, transportation, warehousing  and other incidentals


Source: Latex India
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