THE China market, which seems to favour Malaysia's natural rubber (NR), is attracting increased interest from players in the Malaysian rubber products industry.
Many local rubber-based product companies plan to pump in additional investments in China or to boost their exports there.
A trade mission organised by the Malaysian Rubber Board (MRB) to China early this month – believed to be the first such official visit by local rubber industry players in 10 years – has proven to be a success, with Chinese rubber traders and buyers expressing keen interest and continued support for Malaysia's NR and rubber-based products.
A local SMR 20 (Standard Malaysian Rubber 20) rubber exporter who participated in the 10-day trade mission said: ''I'm optimistic that China will continue to offer opportunities for Malaysian rubber-based companies to explore potential joint ventures or new investments related to the industry.”
He told StarBiz that the MRB mission to China was successful and timely in view of the robust demand for rubber products, particularly with the phenomenal growth in motor vehicle sales.
The exporter said China had growth potential in elastomer consumption, given the steady growth in its motor vehicle and tyre industries through foreign investments. Other rubber products with potential include pharmaceutical rubber-based products, hydraulic and industrial hoses, foam mattresses and pre-cured thread liners.
Malaysian Rubber Products Manufacturers Association (MRPMA) vice-president Lim Sum Teck, who was a member of the MRB trade delegation, said: “We are on a fact-finding mission as many of our members are looking at China for more potential joint-venture opportunities and new contacts.”
Lim said Malaysian rubber was well-known in China for its good quality. China imports about 1.4 million tonnes of NR per year, and this year, Malaysia's NR exports to China are projected to increase to 350,000 tonnes from 290,000 recorded last year.
The world's three largest rubber producers – Thailand (at 3 million tonnes), Indonesia (2 million tonnes) and Malaysia (1.1 million tonnes) – account for almost 70% of the total world rubber production.
Top Glove executive chairman Datuk Dr Lim Wee Chai, in a telephone interview from China, told StarBiz that his company was already planning to set up its second synthetic rubber glove plant in China next year.
“After the success of our first rubber glove plant in Shanghai set up three years ago, we believe that China is a good base for Top Glove to diversify its operations and export overseas.”
Lim said Top Glove would be investing about US$3mil in its second rubber glove plant in China, similar to the amount invested in its first plant, currently producing about 2 billion pieces of rubber gloves yearly.
“We favour China due to, among others, its low production and labour costs as well as the special perks like the two-year tax-free incentive,” he said.
Lim said Top Glove's presence in China would enable the group to tap new opportunities in other areas such as in “products that will synergise with our business strategies.”
Top Glove, which is the world's largest rubber glove maker, aims to double its existing global market share to 24% by 2007.
By the end of this year, Top Glove will have 12 factories in operation, mainly in Malaysia, Thailand and China, producing a total of 18 billion rubber gloves a year.
Goodway, one of Asia's leading rubber compound manufacturers, has also identified China as a market with a lot of potential in the tyre retreading business.
Chief executive officer Tai Boon Wee said: “Goodway is looking into the possibility of setting up a rubber compounding plant, possibly in Dongguan in China, via a joint venture with a local partner. We are still in the early stages of discussion and planning.”
Tai said the initial investment in the proposed plant was estimated at RM10mil. “With the setting up of the plant, we would even have better competitive edge. We foresee that the China market will need over 5,000 tyre retreading plants to cater to future demand.”
Thus, the market will require a huge amount of rubber compounds to be supplied to those tyre retreading plants.
The attraction of China is obvious, given the phenomenal growth in vehicles sales there, as well as the infancy stage of the retreading industry.
China, to date, has 300 to 500 tyre retreaders serving the entire population, compared with 300 in Malaysia. China scraps about 100 million tyres each year.
The number of tyres retreaded last year exceeded 8 million, only slightly above 3% of used tyres available for retreading, against the average of 10% in developed countries.
“Tyre retreading is currently one of those many industries that have registered significant growth in China.
“This is also partly due to the Chinese government's emphasis on environmental issues and recycling of products as the country develops and progresses,” added Tai.