Capacity in Nigeria’s rubber industry has fallen from well above 130,000 metric tonnes per annum (tpa) to between 65,000tpa and 60,000tpa on account of the failure to replenish old plantations and establish new ones experts say. Also, rubber prices which were above $4,000 per tonne recently now hover between $1,970 per tonne and $1,700 per tonne.
Ede Dafinone, chief executive officer, Sapele Integrated Industries Limited, a key crumb rubber processor, attributes the capacity crash in the industry to lower yield in plantations, dwindling supply of rubber from rubber trees and the declining prices of cars internationally.
Dafinone says lumps from trees are in short supply because most of the rubber trees being tapped today were planted in the 1960s and 1970s. He adds that the trend has continued because the trees have a lifespan of about 30 years.
“I foresee export of rubber falling by as much as 50 percent,” he says in an exclusive interview with BusinessDay.
Sunday Kolawole, president, National Rubber Association of Nigeria, tells BusinessDay that rubber trees around the country need to be replenished, stressing that rubber processors and players are having a hard time because the business often has a gestation period of between six and seven years.
According to him, there is still a challenge between natural rubber, which is a rubber latex from plants, and synthetic rubber, which is any type of artificial elastomer mainly synthesised from petroleum by-products, adding that rubber processors have also been faced with poor funding.
“You see, one problem we have is poor funding. Rubber processors have had difficulties accessing funds from financial institutions and the government,” says Kolawole.
He says they have made their representations at the Agricultural Transformation Agenda (ATA), and that the input replanting rehabilitation could have positive impact on the sector if it is taken seriously.
Nigeria’s rubber production has been on the downward trend in recent times. Factors such as low yield in plantations, dwindling international market for cars, fluctuating international rubber prices, volatility of oil prices and energy challenges have made the industry decline.
These have forced firms which used local rubber to manufacture tyres to quit the Nigerian space. Michelin, a French tyre maker, closed down its manufacturing plant in Port Harcourt in 2007 owing to a harsh business environment, notably increase in second-hand tyre imports, smuggling, high energy cost, among others.
In 2008, Dunlop, now DN Tyre, shut down its plant after recording a N2-billion loss due to infrastructural challenges which made it difficult for the company to cover overhead and variable costs and pay back bank loans.
Olufemi Babayemi, company secretary, DN Tyre and Rubber plc, told BusinessDay in an exclusive interview that the company would be ready to return to tyre manufacturing if government could bail it out of debt. She hoped that her firm’s discussion with the National Automotive Council would be fruitful.
DN Tyre is currently involved in tyre imports, rather than manufacturing, BusinessDay gathered.
The industry players at the moment include Okomu, Sapele Integrated, Rubber Steel Limited, DN Tyre, among others.
Stakeholders add that smuggling and second-hand tyres, which put the two giant tyre makers out of business, have worsened, while power outage to industrial areas had risen to 8.3 hours per day by the second half of 2013 (H2 2013), from 7.8 hours per day in the first half of the same year (H1 2013).