NATURAL RUBBER INDUSTRY REPORT IN Q1/2018viracresearch.com/.../2018/05/...report-Q1.2018.pdfFive...

NATURAL RUBBER INDUSTRY REPORT IN Q1/2018

Summary 4 3.4 Import - Export 59

1. Business environment 6 3.5 Price movement 66

1.1 Macroeconomic situation 6 4. Risk analysis 68

1.2 Legal framework 11 4.1 SWOT analysis 69

2. World natural rubber industry 21 5. Industrial development planning 70

2.1 Definition 22 5.1 Natural rubber industry planning 71

2.2 Value chain of production 26 5.2 Natural rubber production planning 74

2.3 Production 28 6. Driving forces, outlook and forecasts 79

2.4 Consumption 35 6.1 Driving forces 80

3. Vietnam natural rubber industry 41 6.2 Outlook 83

3.1 History of formation and development 42 7. Enterprise analysis 86

3.2 Production 44 7.1 Enterprise introduction 87

3.3 Consumption 53 7.2 Financial analysis 98

Content

Abbreviations

ANRPC Association of Natural Rubber Producing Countries

ECM Enterprise cost management

COS Cost of sales

FE Financial expenses

NR Net revenue

GDVC General Department of Vietnam Customs

GSO General Statistic Office of Vietnam

IRSG International Rubber Study Group

RAOT Rubber Authority Of Thailand

VRA Vietnam Rubber Association

VIRAC Vietnam Industry Research and Consultant

VRG Vietnam Rubber Group

Summary

Rubber trees are grown mainly in Southeast

Asia, Africa and a small part of the Americas.

Five countries which are Thailand, Indonesia,

China, Malaysia and Vietnam have the largest

planting area in the world

In 2017, natural rubber consumption in the

world continues to grow from

After rising to record prices in Q1 / 2017,

rubber prices fell sharply in Q2 and remained

steady in Q3 thanks to stable and increasing

crude oil prices.

According to ANRPC, Vietnam has been the

leading rubber producing country in Asia since

Content is intentionally removed for demo purpose

Summary

In 2017, natural rubber consumption is

expected to reach tons,

Currently, Vietnam is ranked the third country

in the world of exporting natural rubber,

Vietnam still has to import a

large amount of rubber due to the fact that the

quality of processed rubber does not meet the

requirements of production although the

output of latex production in the country is not

reduced, the abundant source of goods and the

demand for temporary import for re-export

increases.

The leading companies in the rubber industry in

2016 all have turnover, profits decreased

compared with 2015.

Although the rubber market in 2017 has many

changes, but 2017 is still considered a positive

year with the rubber industry of Vietnam.

Content

1. Business environment

1.1 Macroeconomic situation

1.2 Legal framework

Source: VIRAC, GSO

• GDP in 2017 was estimated at 6.81%

Natural rubber is one of the important agricultural products of

Vietnam.

Source: VIRAC, GSO

GDP growth rate, 2011 - 2017

Structure of GDP by current price, 2017e

In 2017, natural rubber export accounted for of total export turnover of

agriculture, forestry and fishery.

Source: VIRAC, MARD

Export structure of agricultural products of Vietnam, 2017e

Source: VIRAC, MARD

Share of rubber in import-export turnover of agricultural, forestry and fishery products, 2010 - 2017e

Source: VIRAC, SBV

The 2018 exchange rate is expected to remain stable. The exchange rate

in 2018 has many supporting factors

Complex movement of the Chinese Yuan is having a negative impact on

Vietnam's export of natural rubber.

Source: VIRAC, SBV

VND/USD exchange rate, 2013-2017

VND/CNY exchange rate, 2016-2017

• World crude oil prices in 2017 are volatile.

Crude oil is the main raw material for the production of artificial rubber, the substitute product of natural rubber.

World crude oil price, 2011 - 2017

Sources: VIRAC, World Bank

Content

1.2 Legal framework

National standard of natural rubber

1.2 Legal framework

- According to Decision No. 61 / QD-BKHCN dated 01/19/2005 of the Ministry of Science and Technology,

- In December 2016, the Vietnam Rubber Association was granted a certificate of legality by the National Office of Intellectual Property (Ministry of

Science and Technology) for the trademark "Vietnam Rubber"

1.2 Legal framework

Import and export taxes applicable to the rubber industry

1.2 Legal framework

• The impact of China's natural rubber policy

1.2 Legal framework

HS code Description of goodsPreferential import

tax rates

Normal import tax

Special preferential tax rates

(ACFTA)

added tax

Import tariff of natural rubber to China, 2017

Preferential import tax rates

Nguồn: VIRAC, VRA

1.2 Legal framework

Value added tax for the natural rubber industry

1.2 Legal framework

Import tariff of natural rubber

1.2 Legal framework

Code Description of goodsPreferential

taxACFTA AKFTA VJEPA AIFTA

1.2 Legal framework

Code Description of the goods Preferential

taxACFTA AKFTA VJEPA AIFTA

Import tariff of natural rubber

Content

2. World natural rubber industry

2.1 Definition

2.2 Value chain of production

2.3 Production

2.4 Consumption

2.1 Definition

Rubber trees can be planted in three types of soil: red basaltic soil, grayish Potzon on ancient alluvial soil and shale sandstone.

Classification of natural rubber

Classification of natural rubber: Natural rubber after mining is divided into two types of latex and cup lump.

• Latex:

A typical latex sample consists of:

2.1 Definition

Characteristics of Latex:

Latex can be coagulated by the following causes:

Latex after initial processing includes:

• Cup lump:

2.1 Definition

Life cycle of rubber tree

The basic construction stage Stage of exploitation Liquidation

2.1 Definition

Content

2.1 Definition

2.3 Production

2.4 Consumption

There are 5 groups involved in the value chain of world natural rubber industry

2.2 Value chain of world natural rubber industry

Value chain of world natural rubber industry

Content

2.1 Definition

2.3 Production

2.4 Consumption

• Rubber trees are grown mainly in Southeast Asia, Africa and a small

part of the Americas

2.3 Production

Yield of rubber in the 6 main Asian producing countries,

Source: VIRAC, VRA

Source: VIRAC, ANRPC

Top 5 countries with the largest rubber planting area,

2011 – 2016e

Thousand ha

Unit: kg/ha/year

Top countries with the largest harvesting area of natural rubber,

Thousand

Rubber area in Indonesia increased by hectares in the period 2011-

China: In the period 2011-2016, the area of rubber harvest increased by

2.3 Production

Some other countries such as Cambodia and Sri Lanka are also affected

by low rubber prices.

2.3 Production

Thousand tons

Production from 2014 to 2016 tended to decrease due to a number of

reasons:

Production of natural rubber in the world,

2010 – 9M/2017e

• In the main producing countries there is a group of socio-economic and structural factors that restrict the production of natural rubber

2.3 Production

Source: VIRAC, IRSG

The outstanding characteristic of natural rubber compared to

synthetic rubber is good elasticitiy and good recovery.

In the period 2010-2017, the proportion of natural rubber production

accounted for of global production and did not change much.

Structure of world rubber production, 2010 - 2017e

2.3 Production

Source: VIRAC, IRSG

Thousand tons

Thailand is the largest producer and exporter of natural rubber in the

world since 1991,

Thousand

• China is playing an increasingly important role in the production of natural

rubber in the world.

Top countries with the largest natural rubber volume in the

world, 2011 - 2017e

World Natural Rubber Production by Region, 2014-2017e

Content

2.1 Definition

2.3 Production technology and machinery

2.4 Consumption

In 2017, world natural rubber consumption was estimated at thousand

Demand for rubber in the world

2.4 Consumption

Consumption of natural rubber in the world, 2010 - 2017e

Thousand tons %

2.4 Consumption

Source: VIRAC, IRSG, Statista

Thousand

In general, the production volume and tire weight have a great impact on

the consumption demand of natural rubber.

Consumption demand for natural rubber in the world is forecasted to

increase significantly in the upcoming time. The following factors also

help increase the global demand for natural rubber:

Demand for world rubber, 2010-2017e

2.4 Consumption

At the same time, there are a number of factors that restrain the growth of the world natural rubber demand.

Source: VIRAC, IRSG, ANRPC

Proportion of world natural rubber consumption by region,

2014 – 2017e

2.4 Consumption

In 2017, Asia-Pacific continues to be the region with the largest

natural rubber consumption in the world,

Natural rubber is an important raw material in tire production,

China and India continue to be the two largest countries of

consuming natural rubber in the world

2.4 Consumption

Source: VIRAC, IHS

Structure of natural rubber consumption by region, 2016

Structure of using natural rubber, 2016e

Content

3. Vietnam natural rubber industry

3.1 History of formation and development

3,2 Production

3.3 Consumption

3.4 Import - Export

3.5 Price movement

History and development of the natural rubber industry of Vietnam:

Position of natural rubber in the whole rubber industry

Content

3,2 Production

3.3 Consumption

3.4 Import - Export

3.5 Price movement

3.2 Production

• In 2017, the total area of rubber plantation in the whole country

reached hectares,ha

Source: VIRAC, MARD, VRA

Source: VIRAC, MARD

• After the South East, the Central Highlands is the second largest rubber

planting region in Vietnam.Rubber plantation area by region, 2016

Rubber plantation area in Vietnam, 2010 – 2017e

3.2 Production

• The number of enterprises and rubber planters has been declining in

the last three years due to many difficulties in expansion of rubber

plantations.

Source: VIRAC, GSO

Source: VIRAC, GSOSource: VIRAC, GSO

VND Billion

People

Number of enterprises and labourers planting rubber,

2010 - 2016

Distribution of rubber plantation enterprises by region,

2010 - 2016The total revenue and profit of the rubber plantation industry,

2010 - 2016

3.2 Production

Source: VIRAC, GSO

People

Number of enterprises and labourers in production of rubber products,

2010 - 2016

Distribution of rubber product production enterprises, 2016

3.2 Production

Source: VIRAC

Main participants planting rubber

in Vietnam can be divided into

three groups.

Structure of the main participants of Vietnam rubber industry

Main participants VRG Private rubber companies Small rubber plantations

Vietnam Rubber Group (VRG)

3.2 Production

Source: VIRAC, GSO Source: VIRAC, VRA

Private enterprise

Small rubber plantations

Province Area of small rubber

plantationsTotal area rubber plantation

Small rubber plantation area of some provinces Structure of rubber plantation area, 2016

Thousand tons

Sources: VIRAC, MARD, VRA

Production and productivity of natural rubber production in Vietnam, 2011 - 2017e

According to the Report of the Association of Natural Rubber Producing Countries (ANRPC), Vietnam has led in rubber producing productivity in Asia

since 2013,

3.2 Production

Sources: VIRAC, VRG

Structure of rubber production of VRG, 2016

Rubber proportion of VRG, 2017e

Sources: VIRAC, VRG

Therefore, restructuring of VRG's

products is considered to be very reasonable in the current situation.

3.2 Production

Source: VIRAC, VRA

Production targets of some natural rubber companies, 2016

Area of rubber

exploitation (ha)

Output of rubber

exploitation (tons)

Productivity

(tons/ha)

Output of purchased

rubber (tons)

Output of processed

rubber (tons)

Content

3.2 Production

3.3 Consumption

3.4 Import – Export

3.5 Price movement

3.3 Consumption

• Rubber is the input material for many production and consumption

sectors:Thousand tons

Source: VIRAC, VRA

• In 2017, the natural rubber consumption of Vietnam was estimated at

thousand tons,

Consumption of natural rubber in Vietnam, 2010 – 2017e

3.3 Consumption

• Of the total volume of natural rubber exploited and imported, exported natural rubber still accounts for a large proportion, the rest is to serve the

demand for domestic consumption.

Source: VIRAC, GSO, GDVC, VRA

Proportion of natural rubber consumption by supply,

2010 – 2017e

3.3 Consumption

Source: VIRAC, GSO, GDVC

Thousand pieces Ton

Source: VIRAC, VRA

Major domestic rubber products, 2010 – 2017e Structure of natural rubber consumption, 2016e

• Natural rubber in Vietnam is mainly used for the production of tires, gloves, pillow cushion, etc.

3.3 Consumption

Accordingly, tires have the largest export value in the products of Vietnam rubber processing industry,

Source: VIRAC, GDVC, VRASource: VIRAC, GDVC, VRA

USD Million

Category of Vietnamese exported tires, 2016eExport value of tires in Vietnam, 2011 - 2016e

3.3 Consumption

Source: VIRAC, GDVC, VRA

Top 10 leading enterprises of exporting tire, 2016e

No. Companies Proportion (%)

Vietnam's export tire market, 2016e

Content

3.2 Production

3.3 Consumption

3.5 Price movement

3.4 Import and Export – Export

• Export of natural rubber in 2017 reached tons with an estimated

value of billion USD.Thousand tons

Source: VIRAC, MARD, VRA

USD Million

Source: VIRAC, VRA

• However, most of Vietnam's rubber is still exported as raw materials.

Content is intentionally removed for demo purposeExport structure of rubber industry, 2016

Natural rubber export of Vietnam, 2010 – 2017e

In 2017, Vietnam exported natural rubber to 28 markets, of which China

continues to be the largest export market of Vietnam.

Type structure is one of the main reasons that Vietnam's rubber is heavily

dependent on Chinese market,

Source: VIRAC, MARD

Source: VIRAC, VRA

Vietnam’s natural rubber export markets, 2017e

Structure of exported natural rubber by type, 2017

Source: VIRAC, GDVC

No. Enterprise No. Enterprise

Top 20 leading enterprises of exporting natural rubber in 2017 by turnover

In 2017, export of rubber products reached million USD, increasing by

over the same period in 2016.

Source: VIRAC, VRA

USD Million

Source: VIRAC, VRASource: VIRAC, GDVC

Exports of products made of rubber, 2010 – 2017

Export structure of products made of rubber, 2016e

Export markets of rubber products, 2017

3.4 Import and Export – Import

Source: VIRAC, MARD

USD Million

Source: VIRAC, MARD

Thousand

Import of natural rubber of Vietnam, 2010-2017

Import markets of Vietnam's natural rubber by volume, 2017

3.4 Import and Export – Import

Source: VIRAC, VRA, GDVC

Source: VIRAC, GDVC

USD Million

The markets supplying rubber products for Vietnam are mostly located in Asia.

Import of products made of rubber, 2010 – 2017

Markets which import products made of rubber, 2017

Content

3.2 Production

3.3 Consumption

3.5 Price movement

Source: VIRAC, VRA

USD/ton

Source: VIRAC, VRA

VNĐ/kg

Exporting price movement of natural rubber of Vietnam,

2006 – 2017Rubber price movement in the country, 1/2016-12/2017

• From 2012 until now, natural rubber price have fallen

continuously due to the slow recovery of the world economy after the crisis from 2009 to 2010, which led to a slow increase in demand for rubber

and high inventory, making the price drop. On the other hand, the impact of low crude oil prices makes it hard for natural rubber to return to high

prices

Content

4. Risk analysis

4.1 SWOT analysis

4. Risk analysis

4.2 SWOT analysis

Content

5. Industrial development planning

5.1 Natural rubber industry planning

5.2 Natural rubber production planning

On June 03, 2009, the Prime Minister issued Decision No. 750 / QD-TTg on approving the master plan for development of Vietnam rubber industry to 2015

with orientation to 2020.

Content

On May 14, 2015, the Ministry of Industry and Trade issued Decision No. 4665 / QD-BCT approving the development plan for the production of Vietnam's

rubber products by 2025 with a vision to 2035.

Content

6. Driving forces, outlook and forecasts

6.1 Driving forces

6.2 Outlook

Favorable natural conditions:

Favorable socio-economic conditions

Government’s supporting policies:

6.1 Driving forces

Opportunities from economic integration and WTO participation:

6.1 Driving forces

In addition, the economic integration with the world also brings many opportunities for the natural rubber industry of Vietnam:

Content

6.1 Driving forces

6.2 Outlook

6.2 Outlook - outlook for the world market

There are four factors that affect natural rubber price in 2017:

6. Driving forces, prospects and forecasts

6.2 Prospects - Prospects for Vietnam market

2013 2014F 2015F 2016F 2017F 2018F CAGR

Tire of heavy truck

Radial

Growth rate of radial tire

Decline rate of bias tire

Source: VIRAC, MOIT

Vietnam rubber market in general and natural rubber in particular will continue to grow strongly in the next few years thanks to the development of

automobile consumption.

Forecasted demand for tires in Vietnam, 2013 – 2018F

Content

7. Enterprise analysis

7.1 Enterprise introduction

7.2 Financial analysis

Top enterprises in the natural rubber industry having largest revenue in 2016

NameCharter capital

(VND Million)Total assets (VND Million)

Revenue in 2016 (VND

Million)

Overview of Dau Tieng Rubber Corporation.

Phuoc Hoa Rubber Joint Stock Company

Phu Rieng Rubber Company Limited

Dongil Rubber Belt Company Limited Vietnam (DRB)

VRG Khai Hoan Joint Stock Company

Dong Nai Rubber Corporation (Donaruco)

Dong Phu Rubber Joint Stock Company

Vietnam NOK Company Limited

Vietnam – Italia Company Limited

BINH DUONG INVESTMENT AND TRADE JOINT STOCK COMPANY

(BECAMEX ITC)

Content

7.2 Financial analysis

From the difficulties in 2015, the rubber sector in 2016 continued to encounter lower growth than forecasted.

7.2 Financial analysis – Profitability

Source: VIRAC

VND Million

Net revenue growth rate, 2015-2016

Source: VIRAC

VND Million

Gross profit growth rate, 2015-2016

Most rubber planting and processing businesses in 2016 had an increase in gross margin compared to that in 2015.

Source: VIRACContent is intentionally removed for demo purpose

Gross profit margin, 2015-2016

7.2 Financial analysis – Solvency

Source: VIRAC

Quick payment ratio, 2015-2016

Current payment ratio, 2015-2016

7.2 Financial analysis – Solvency

Source: VIRAC

Content is intentionally removed for demo purposeInventory Turnover Ratio, 2015-2016

Receivables turnover ratio, 2015-2016

7.2 Financial analysis – Repayment capability

Source: VIRAC

Total Debt/Total Assets, 2015-2016

Total Debt/Owners' equity, 2015-2016

7.2 Financial analysis – Performance efficiency

Source: VIRAC

Total asset turnover, 2015-2016

Fixed asset turnover, 2015-2016

7.2 Financial analysis – Performance efficiency

Source: VIRAC

VND Million

Financial expenses, 2016

7.2 Financial analysis – Profit ratio

Source: VIRAC

Profit margin, 2016

REPORT DISCLAIMER

Report disclaimer

This document has been prepared in good faith on the basis of information available at the date of publication without any independent verification. VIRAC has

produced this report for private circulation to professional clients only. All information and statistical data herein have been obtained from sources we believe to

be reliable and made to ensure the accuracy of the contents of the pages of the report at the time of preparation. Such information has not been independently

verified and VIRAC makes no representation or warranty, whether express or implied, of any kind with respect to the document and its contents, information and

materials. The content found in this report is proprietary to VIRAC and is provided solely for your personal and non-commercial use. You agree that you will not

use this report for any purpose that is unlawful and that you will not reproduce the report or redistribute it outside your organization, or place it on a website for

public access without the express written permission of VIRAC.

SHOULD YOU NEED ANY ASSISTANCE, PLEASE CONTACT US:

VIETNAM INDUSTRY RESEARCH AND CONSUTANCY (VIRAC JSC.,)

6th Floor, Anh Minh Building, 36 Hoang Cau, O Cho Dua, Dong Da, Hanoi, Vietnam

Website: http://virac.com.vn/

Email: viracresearch@virac.com.vn | Tel: +84 463289520

Thank you !

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