With the escalation of the US/China trade war, the Asian region has fallen victim to the spat. Vietnam’s rubber sector has been affected since China is the largest importer of Vietnamese rubber, for its tyre manufacturing sector.
The US government recently slapped extra tariffs on US$189 billion worth of Chinese imports, including automotive spare parts. Since Chinese exports of automotive spare parts into the US are now subject to higher tariffs, the country’s rubber products sector is likely to suffer adverse effects, according to To Xuan Phuc, Senior policy analyst at Forest Trends.
Currently, China is the main importer of Vietnam’s raw rubber, accounting for around 60% of Vietnam’s total rubber exports, with 70% of the natural rubber used for tyre manufacturing. Vietnam shipped 870,000 tonnes of raw rubber worth US$1.2 billion to China during the year up until August, up 8.2% in volume but down 11.8% in value from a year earlier.
China, India and Malaysia were the largest buyers of Vietnam’s rubber in the first seven months of this year, accounting for 63.5%, 5.7% and 3.9%, respectively.
A report by Agro Processing and Market Development Authority under the Ministry of Agriculture and Rural Development said that even though China’s rubber inventory fell by 3.26% compared to July, the export value of Vietnamese rubber has continued to decrease due to lower market demand. It also pointed out that China/US trade tensions are a factor contributing to China’s falling rubber demand.
According to the agriculture ministry, the rubber market has to move away from its dependence on the Chinese market, and expand its export markets, especially to countries like India.
India is one main target as the recent floods in the southern state of Kerala, which is a major rubber producer, have resulted in a scaling down of rubber production in the country, with a slow recovery period envisaged.
The ministry forecasts that Indian tyre manufacturers such as MRF, JK Tyre, Apollo Tyres and Ceat will have to increase rubber imports and Vietnam can come into the picture to supply its rubber to the tyre makers.