Trade war sapping demand for Thai rubber

BANGKOK • They work in the pre-dawn gloom tapping trees for the “white gold” that has made their country the world’s top rubber producer – but as prices plunge due to the US-China trade war, Thai farmers are giving up the sap.

Workers sorting out raw rubber sheets at a factory in Rayong province, Thailand. Thai latex makes everything from tyres and condoms to baby pacifiers and surgical gloves, but the rubber trade is at a crossroads as a bitter dispute between the world’s two biggest economies ricochets across South-east Asia. PHOTO: AGENCE FRANCE-PRESSE

Thai latex makes everything from tyres and condoms to baby pacifiers and surgical gloves, the fruit of the rubber trees cultivated across endless acres of the country. But the rubber trade is at a crossroads as a bitter dispute between the world’s two biggest economies ricochets across South-east Asia with unexpected consequences.

Countries such as Vietnam are benefiting as manufacturers migrate from China to avoid punishing tariffs on exports to the United States. But in Thailand, the price of rubber has slumped 20 per cent since June as those same tariffs bite hard on demand from factories in China – the market for more than half its latex exports.

Some of Thailand’s rubber workers are being forced to abandon their plantation jobs for factory work.

“I couldn’t feed my children any more,” said Ms Annita, who used to work 10 hours a day harvesting latex in Chiang Rai, northern Thailand, making US$7 (S$9.63) a day, less than the minimum wage and half the going rate several years ago. So she has taken a job at a packing plant earning around US$9 daily.

While the plight of US soya bean farmers hit by the tariffs has grabbed the headlines – they face a 25 per cent levy to access China, the world’s biggest soya bean market – other troubles are quietly brewing across the world.

The bottom has fallen out of the once-booming industry as Thai rubber prices plummet to about US$1.21 a kg – they were five times that in 2011.

Around one-third of all the rubber in the world comes from Thailand, where latex is harvested at night or before dawn by tappers who make an incision and collect the sap as it bleeds out.

The country currently produces about 4.6 million tonnes of rubber a year and the sudden drop in Chinese demand has compounded a longer-term global oversupply crisis to push prices off a cliff.

“A climate of uncertainty” pervades the industry after US tariffs hit nearly half of all Chinese imports, according to Mr Karako Kittipol, marketing manager at Thai Hua Rubber. “Chinese companies don’t want to have too much rubber in stock,” he told AFP.

The value of the yuan against the US dollar has also dipped, making rubber more expensive for Chinese manufacturers to buy.

Thailand is a bystander in the trade war between the world’s two largest economies. But the ruling junta is trying to address the supply-side issues and is aiming to reduce the area under cultivation for rubber by more than 60,000 ha per year over the next five years.