RUBBER IN MALAYSIA

Malaysia's natural rubber production in 2011 amounted to 996,210 tonnes compared with 939,241 tonnes in 2010. The domestic consumption of natural rubber for 2011 was 401,923 tonnes. [Source: Malaysian Industrial Development Authority]

Thailand, Indonesia and Malaysia account for about 70 percent of global supply of rubber, with Malaysia now a distant third behind Indonesia and Thailand.

Crude oil is used to produce synthetic rubber, and natural rubber prices are linked to the cost of its synthetic counterpart.

Liau Y-Sing of Bloomberg wrote: “Malaysia natural rubber output may fall 4.6 percent to 950,000 metric tons in 2012, the Association of Natural Rubber Producing Countries said. That’s less than a third of top producers Thailand and Indonesia. Vietnam could also overtake Malaysia this year to become the world’s third-largest grower, with production expected to surge 18 percent to 955,000 tons, the association said. India is not far behind with output forecast to rise 3.1 percent to 920,000 tons in 2012, it said. Once a pillar of the economy, natural rubber has been eclipsed by palm oil in Malaysia after a global crash in prices in the late 1990s prompted many planters to abandon the commodity. As well as increasing production, some Southeast Asian neighbors have the advantage of lower labor costs, according to the International Rubber Study Group. The government is looking for ways to increase yields and commercialize new rubber products to rejuvenate a sector that accounted for about 6 percent of exports last year, according to rubber board data. “We have to revolutionize the industry,” Salmiah Ahmad, the board’s director-general, said in a Nov. 12 interview. “In two to five years’ time, we may fall behind India and Vietnam in terms of production.” [Source: Liau Y-Sing, Bloomberg, November 19, 2012]

The worlds top producers of rubber are (1988): 1) USSR, 2) the U.S., 3) Malaysia, 4) Japan, 5) Indonesia, 6) Thailand, 7) France, 8) W. Germany, 9) the UK, 10) Brazil.

The worlds top exporters of rubber are (1988): 1) Malaysia, 2) Indonesia, 3) Thailand, 4) the U.S., 5) France, 6) W. Germany, 7) Japan, 8) the Netherlands, 9) U.S.S.R. and 10) the UK.

Production of rubber in Malaysia declined from over a million tons in the 1990s to 615,222 tons in 2000 and 545,872 tons in 2002. It now accounts for about a fifth of the world’s rubber and is the world’s third largest producer behind Thailand and Indonesia.

History of Rubber in Malaysia

Rubber was introduced by British colonists to Singapore in 1877 via Brazil, Kew Gardens in London and Sri Lanka. Within a decade after it was introduced slash and burn agriculturalists in remote parts of Southeast Asia planted rubber trees in their cultivated plots. Malaysia had an ideal climate, soil for rubber and plenty of land. Production increased dramatically after the 1890s when there was a huge surge in demand for rubber. For many years tin and rubber were Malaysia’s primary exports.

By the 1930s, Malaysia produced half of the world’s rubber. Many of the Chinese and Indians that live in Malaysia today are descendants of laborers brought to work on the rubber plantations. For the most part the plantations were owned by European owners. They helped transform Malaysia into Britain’s richest colony. After independence, many of the plantations were turned over to Malaysian hands and some were converted to palm oil plantations.

Declining prices and competition has forced many farmers to abandon rubber, and rubber tapers are becoming a dying breed. Between 1999 and 2004, 300,000 hectares of the 1.4 million hectares of planted rubber were abandoned, in many cases in favor of oil palms which are more lucrative. . So many have given up on rubber that some Malaysian rubber manufacturers have to import rubber and Malaysia has became one of the world’s largest importers of rubber.

Traditionally, just under half of Malaysia’s rubber production came from smallholders rather than from estates and plantations. In the 1990s, a typical rubber tapper, who spent about six hours a day tapping 400 trees, made about $131 a month. Farmers got $65 a month from the government if their income fell below $60 a month.

Rubber-based Industry

The Malaysian rubber products industry is made up of more than 500 manufacturers producing latex products; tyres and tyre-related products; and industrial and general rubber products. The industry contributed 18.1 billion to the country's export earnings in 2011. Rubber products accounted for 3.9 percent of Malaysia's total exports for manufacturing products. [Source: Malaysian Industrial Development Authority]

The natural rubber consuming industries for 2011 were latex products (80.3 percent), tyres (9.2 percent), general rubber products (7.2 percent), industrial rubber products (3.2 percent) and others (0.2 percent). The rapid growth of the industry has enabled Malaysia to become the world's largest consumer of natural rubber latex.

The latex products sub-sector is the largest sub-sector within the rubber products industry and comprises 125 manufacturers producing gloves, condom, catheters, latex thread and others. This sub-sector accounted for 81 percent of the rubber total value of exports, largely contributed by gloves, catheters and latex threads. Malaysia continued to maintain its position as the world's leading producer and exporter of catheters, latex threads and natural rubber medical gloves.

There are currently 120 companies in the tyres and tyre-related products sub-sector comprising nine tyre producers while the remaining companies produce retreads, tyre treads for retreading, valves and other accessories. There are three major tyre producers producing passenger car tyres, commercial vehicle tyres and earthmover tyres, and another nine manufacturing other types of tyres. Exports value of rubber tyres, flaps and inner tubes in 2011 amounted to RM779.3 million.

The industrial and general rubber products sub-sector comprises 185 companies producing a wide range of rubber products such as mountings, beltings, hoses, tubings, seals, and sheetings for the automotive, electrical & electronics, machinery & equipment and construction industries, largely for the domestic market.

The rubber products industry will need to diversify further, emphasising on high value-added and high technology rubber products, such as products for engineering, construction and marine applications. Under the Palm Oil and Rubber NKEA, four EPPs are being implemented including accelerating downstream activities and commercialising new rubber products. The rubber industry is targeted to contribute RM52.9 billion to the GNI by 2020.

The government continues to promote the development of Malaysia's resource-based industries to diversify the country's sources of growth. In addition to fiscal incentives which are currently available for promoted products and activities, the government has further fine-tuned the incentives to promote specific activities among which is the rubber products industry. To further encourage investments in resource-based industries, local companies in the rubber industry that reinvest to expand their projects are eligible for Pioneer Status or Investment Tax Allowance.

Rubber Products

Malaysia has many rubber-based manufacturing activities. Latex based products made in Malaysia include condoms, surgical gloves, catheters. Malaysia produces SpongeBob Square-Pants bubbleheads and about 60 percent of the world’s latex gloves. The industry had done considerable research ro make gloves with chlorine to eliminate a protein that cause allergies among many people.

Fear of HIV-AIDS caused demand to spike for latex gloves. When demand peaked in the 1990s there were around 300 companies in Malaysia that produced rubber gloves. By the early 2000s there were only 80. Surgical gloves can also be made from vinyl and Nitrile but people in the rubber industry say they are less comfortable and more likely to leak.

Condoms Lifeline for Malaysian Rubber

Liau Y-Sing of Bloomberg wrote: “Karex Industries Sdn., the world’s biggest condom manufacturer, will expand capacity after selling shares in 2013, boosting Malaysia’s bid to rejuvenate its rubber industry amid competition from Thailand and Vietnam. “Demand for condoms is continuously growing,” said Goh Miah Kiat, whose great-grandfather started the company as a grocery store on a Malaysian rubber plantation almost a century ago. “It’s a very good time. With the company going public, additional funds could be raised for it to expand further.” [Source: Liau Y-Sing, Bloomberg, November 19, 2012]

“From trading rubber, the Gohs’ business evolved into exporting contraceptives. Their move up the value chain mirrors Malaysia’s as it seeks to shift from an agricultural base into more lucrative industries, ranging from latex medical gloves to petrochemicals, as part of a strategic move to escape what economists call the middle-income trap. “When we got into condoms, it was pretty much a dirty word,” Goh, executive director at Karex, said in a Nov. 12 interview. “Today, things have changed. Asia is going to create a lot of demand because our population is very young.”

“The Selangor-based company, which supplies the United Nations and markets including Brazil, the U.S. and China, is seeking funds through a share sale to double annual production capacity to 6 billion pieces, Goh said. The Southeast Asian country is the world’s biggest condom producer, according to the Malaysian Rubber Board. The contraceptives business is helping Malaysia revive an industry it once dominated.

“To help keep manufacturers like Top Glove and Karex supplied with sufficient raw material to grow, the authorities are handing out grants to smallholders to replant 40,000 hectares annually and plant 18,000 hectares of new rubber areas over the next five years, Pemandu said. “We’re constantly looking at new markets,” Karex’s Goh said. This includes “developing countries such as the Commonwealth of Independent States, Eastern Europe and Latin America where we have less presence. We’ve embarked on a program to automate our processes.”

Efforts to Revive Malaysia’s Rubber Industry

Malaysia is attempting to revive its rubber industry, a sector it once dominated as rival rubber producers Thailand, Indonesia and Vietnam gain ground. Liau Y-Sing of Bloomberg wrote: “The government is looking for ways to increase yields and commercialize new rubber products to rejuvenate a sector that accounted for about 6 percent of exports last year, according to rubber board data. “We have to revolutionize the industry,” Salmiah Ahmad, the board’s director-general, said in a Nov. 12 interview. “In two to five years’ time, we may fall behind India and Vietnam in terms of production.” [Source: Liau Y-Sing, Bloomberg, November 19, 2012]

“Automated rubber tapping would address Malaysia’s labor challenges, though may not be an economically viable for small planters, according to the group. Smallholders, or those with less than 40 hectares (99 acres), account for 95 percent of Malaysia’s production, rubber board figures show. “On the plantation side, there is more investment going into the Mekong region in Cambodia and Laos,” Lekshmi Nair, Singapore-based senior economist with the International Rubber Study Group, said in a Nov. 12 interview. “More downstream investments are going to Vietnam and Indonesia. Malaysia has to compete with these countries. That’s a great challenge.”

To help regain its edge, there are plans to commercialize specialty rubber materials such as ekoprena and pureprena for use in products such as eco-friendly tires, according to an April report by the government’s Performance Management and Delivery Unit, or Pemandu.

The government also wants to encourage more value-added industries like condoms. The country is forecast to export 12 million kilograms of condoms valued at 320 million ringgit ($104 million) this year, compared with 10.9 million kilograms worth 277 million ringgit in 2011, government data show.

Companies including Top Glove Corp. (TOPG) and Supermax Corp. (SUCB) have already established Malaysia as the world’s biggest supplier of rubber and latex gloves. The government wants to increase the country’s global market share in this sub-sector to 65 percent by 2020 from 62 percent under its economic plan.

Top Glove: Malaysia’s and World’s Top Rubber Glove Maker

Malaysia-based Top Glove is the world’s No. 1 rubber glover maker. In June 2013, Business Times reported: “Top Glove Corp Bhd intends to grow its global market share from an estimated 25 percent currently to 30 percent by end-2015. RHB Research said all of Top Glove's expansion plans are now focused on nitrile gloves. "The management said the focus of the capacity expansion plans at phase 2 of Factory 23 (Ipoh) has switched to nitrile gloves from natural rubber gloves earlier. "This, together with the other planned capacity expansion plans, means that Top Glove will be adding another 4.9 billion pieces per annum to its nitrile glove production capacity this year, bringing total nitrile glove production capacity to 10 billion," it said. [Source: Business Times, June 9, 2013]

In July 2005, Haslinda Amin and Stephanie Phang wrote in Bloomberg, “Top Glove Corp., the world's biggest supplier of rubber gloves, expects sales to rise 43 percent this year as it boosts capacity by more than a third to meet demand. Top Glove, based in Klang on Malaysia's west coast, has about 14 percent of the global market for gloves used by the medical profession and food industry, and is aiming for a 24 percent share by the end of 2007. Demand for protective gloves surged after 1987, when the U.S.-based Centers for Disease Control and Prevention said medical workers should use gloves to protect against diseases such as AIDS. The outbreaks of severe acute respiratory syndrome and bird flu also boosted sales. [Source: Haslinda Amin and Stephanie Phang, Bloomberg, July 24, 2005]

Aside from diseases, the war in Iraq and tsunami disaster have also boosted demand for gloves, said Gan, who ranks Top Glove as one of his "top'' buys. Global demand for latex gloves made by Top Glove and rivals including tissue- and diaper-maker Kimberly Clark Corp. is rising about 12 percent a year, according to Top Glove. About 100 billion latex gloves are sold each year.

Top Glove is building three more plants, two in Malaysia and one in China, and will add 1,800 workers, equivalent to 30 percent of its existing workforce, by the end of next year. It has 11 factories in Malaysia, China and Thailand producing 13.7 billion gloves a year. Much of the company's expansion may be in China, which is expected to account for about 30 percent of Top Glove's sales within two years, up from 15 to 20 percent, Lim said.

Top Glove, which sells to 600 customers in 160 countries, plans to increase sales to Latin American and African countries, Lim said. The U.S. and Europe are its two biggest markets, each accounting for 30 percent of sales. The company may acquire rival rubber glove makers in Malaysia or Thailand in the next 12 months, Lim said. The companies it is considering buying are 10 or 20 percent the size of Top Glove, he said.

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Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, Malaysia Tourism Promotion Board, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Foreign Policy, Wikipedia, BBC, CNN, and various books, websites and other publications.

Last updated June 2015