Rubber firms report deep losses

A man inspects collected latex at a Memot district rubber plantation in Kampong Cham province. Heng Chivoan

Rubber firms report deep losses

Thu, 17 March 2016 ppp

Cheng Sokhorng

Cambodia's rubber industry’s woes have begun to crystallise after two major rubber plantations announced deep losses yesterday, attributing their downturn to high production costs and a drop in global rubber prices.

Sopheak Nika Investment Group, which owns one of the Kingdom’s largest rubber plantations, registered a loss of $3 million in 2015, on top of a $1 million loss in 2014, the firm’s owner Men Sopheak said yesterday.

Sopheak said the major issue was a drop in international rubber prices, which were now below their production costs, adding that this had led to most of the family-run plantations having to give up their businesses.

“The rubber price in the market is around $1,000 to $1,100 per tonne, whereas the cost of production is at $1,400 to $1,500,” he said. “I don’t know how a company can survive if rubber prices remain the same.”

He said that while his company, which cultivates rubber on a 14,000-hectare plantation in Kampong Cham province, had funds to fall back on, the government needed to reduce export tariffs on rubber as had been done in neighbouring companies.

Another major rubber producer, Long Sreng International, said it was facing 30 to 40 per cent losses last year, but did not wish to divulge the exact figure. Plantation owner Heng Sreng also attributed the losses to a severe mismatch in production costs and international rubber prices.

“Currently we are losing money on raw materials and the cost of production machinery,” he said. “We can only afford to pay for our daily utilities, as well as labour costs.”

Sreng, whose plantation in Kampong Cham province spans 8,000 hectares, with an additional government concession of 6,000 hectares, said the problem was industry-wide and that an easing of the export tariff would help plantations survive only if there was an increase in rubber prices as well.

“If the government takes off the tariff for rubber exports or charges only 1 per cent tariff, it will help us to survive,” he said. “But if there is no intervention and rubber prices do not increase, most family run rubber plantations will go bankrupt.”

Eang Sophallet, spokesman for the Agriculture Ministry, said that while the ministry was aware of the challenges facing the rubber sector, it was not limited to Cambodia, and was more an international problem.

“The demand in the international market is going down because of the economic slowdown, especially in China, which has reduced demand and rubber prices,” he said.

However, Sophallet said that the ministry had submitted a request to the Council of Ministers last month calling for the removal of export tariffs in order to help the sector.

Prime Minister Hun Sen issued a sub-decree on March 4 to revise the sliding tax scale on exports of natural rubber. Under the new scheme, rubber shipments are not be taxed when the export price is below $1,000 per tonne.

Exporters pay $150 per tonne on shipments valued between $1,000 and $2,000 per tonne, and $200 per tonne on shipments up to $3,000 per tonne.

Rubber producers have criticised the revised tax regime, arguing that at current market prices – about $1,080 per tonne – the $50 per tonne export tax remains in effect.