Working towards greater community control over land, forests and natural resources

Rubber growers struggle with volatile Chinese market

Vientiane Times, 25 Nov 2013

Rubber growers in northern Laos are struggling to get a fair price for their product on the volatile Chinese export market, with no bilateral agreement between the two countries to ensure stability. Most raw rubber produced in northern Laos is exported to China because of the proximity of the border.

Some Chinese traders are flouting the new regulation by importing illegally across parts of the border that are not well monitored.But recently the Chinese government imposed a quota on five companies that buy Lao rubber limiting them to an import of 2,000 tonnes per year from Luang Namtha province, the provincial Industry and Commerce Department Director, Mr Phonxay Chanthasone, told Vientiane Times last week.

The companies have told Lao provincial authorities they will ask the Chinese government for an expansion of the quota. The limited market has caused a number of problems for rubber growers. Chinese companies that still had room in their quotas have been refusing to buy rubber unless the price was dramatically reduced, and growers have had to comply because of the limited number of buyers.

Rubber prices have fluctuated seemingly at random. The last few months have seen a drop of 200-300 kip, and the price now sits at around 7,000-8,000 kip per kilogram. Mr Phonxay said farmers selling their products individually had put them in a weak bargaining position that allowed them to be taken advantage of.

The provincial governor is now working with his district counterparts and local authorities to set up farming cooperative groups to improve production and achieve economies of scale. The increased bargaining power is expected to allow the groups to demand higher prices for their produce. The province will also organise a technical unit to inspect the local rubber trade and monitor global and regional prices to stop traders taking advantage of growers.

If possible, the government will seek to approve investors wanting to produce tyres or other rubber products in the province to give growers a stable local market. Despite the problems, the amount of rubber exported to China increased this year. Last year, the province exported around 1,600 tonnes of unfinished rubber and more than 230 tonnes of lump rubber to China, worth almost US$5 million. This year, it exported 3,500 tonnes of unfinished rubber and 1,200 tonnes of lump rubber, worth almost US$10 million.

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