Natural Rubber Export Price in Indonesia May Face a Dipping Trend in the Near Future
Indonesia's Natural rubber industry is facing potential setbacks due to the European Union's Deforestation Regulation (EUDR). The regulation demands strict compliance with environmental standards, including the provision of geolocation data for plantations. This could impact exports significantly, as the EU accounts for a notable portion of the country's rubber exports.
Recent data indicates that Indonesia exported a considerable amount of rubber, with a significant fraction destined for the EU. Industry representatives have voiced concerns that non-compliance with the EUDR could lead to a sharp decline in export values. The challenges are particularly acute for smallholder farmers who contribute the majority of the nation's natural rubber production but often lack the necessary certification.
The government is reportedly taking measures to assist rubber farmers in meeting the EUDR requirements by improving data collection and establishing traceability methods. This would aid in maintaining the export of rubber and its derivatives to the EU market.
There is also concern that other major trading partners might adopt similar requirements, potentially affecting broader market access. Some countries have already begun altering their sourcing strategies in anticipation of the EU's regulation.
The importance of the export market for Indonesia's rubber industry is underscored by the fact that domestic consumption does not match the levels of production. Historical data shows that while production has reached significant highs, domestic consumption has remained relatively low, leading to a reliance on the export market.
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The industry has faced other challenges as well, including stagnant prices, disease outbreaks, labor shortages, and land use changes. These factors have contributed to a decrease in both the production of raw materials and the operation of processing factories over recent years.
According to the article by Procurement Resource, Indonesia's rubber industry could face declines due to the EU's Deforestation Regulation, requiring strict environmental data for exports. This is especially challenging for smallholder farmers and has prompted government action to meet compliance and maintain vital EU trade, amidst concerns from other trading partners and a backdrop of domestic industry challenges.
