Indonesia, the world’s second-largest natural rubber (NR) producer, supplying about 21% of global output, saw its NR exports drop by 9.5% in the first half of 2022 (January–June) compared to the same period last year, with total exports reaching 1.135 million tons.
Exports Down 9.5% in the First Half of 2022
Table of Contents
The decline in Indonesia’s NR exports was primarily due to a significant drop in shipments to key markets:
-
United States: down 5.1%
-
China: down 17.7%
-
India: down 44.2%
-
South Korea: down 43.8%
In contrast, exports to Japan increased 8.5%, making it Indonesia’s largest NR export market during this period.
Indonesia has traditionally been a preferred NR supplier for many global tire manufacturers, largely due to its cost advantage over other Southeast Asian countries. However, in recent years, Indonesia’s rubber has lost its cost competitiveness due to falling productivity and multiple structural challenges.
Falling Yields and Structural Weaknesses in Rubber Plantations
Average rubber yields in Indonesia have declined significantly due to several factors:
-
Disease Outbreaks: The Pestalotiopsis fungal disease, which emerged in 2017, has infected nearly 400,000 hectares of mature rubber plantations.
-
Aging Trees: Many rubber trees are past their economic lifespan (about 25 years), yet replanting has been delayed due to the high cost of replanting and the lack of financial support for smallholders.
-
Low Rubber Prices: Since 2016, the decline in NR prices has discouraged smallholders from maintaining their plantations.
-
Labor and Income Constraints: Many poor farmers rely on rubber as a subsistence crop. Unprofitable prices and institutional neglect have forced them to abandon tapping or switch to other crops, especially during the COVID-19 pandemic.
As a result, domestic rubber supply shortages—particularly of raw latex and cup lump—have severely impacted TSR (Technically Specified Rubber) manufacturers. High domestic raw material costs have made Indonesian TSR more expensive than competitors such as Côte d’Ivoire.
Cost Pressures and Factory Closures
In June 2022, the FOB price of TSR exported to the U.S. from Indonesia was USD 181.1 per 100 kg, significantly higher than USD 162.9 per 100 kg from Côte d’Ivoire. The higher production costs, combined with rising competition from low-cost suppliers, have made it increasingly difficult for Indonesian TSR factories to operate profitably.
Several TSR plants have shut down operations due to poor profitability and financial losses from the pandemic period.
Production Outlook and the Need for Replanting
Based on export trends, Indonesia’s NR production for 2022 is projected at 2.80 million tons, a decline of 8% compared to 2021. The downward trend has persisted since 2018 and is expected to continue unless plantation productivity improves.
Experts suggest implementing a large-scale accelerated replanting program, supported by:
-
Attractive financial incentives to cover replanting and maintenance costs.
-
Income support for farmers during the long gestation period (about 7 years).
-
Improved rubber clones with higher yields, pest resistance, and climate adaptability.
Such a program could double Indonesia’s current average yield from 1,000 kg/ha to 2,000 kg/ha, effectively halving production costs and revitalizing the country’s struggling rubber economy.