Rising demand for Indo rubber

Indonesia, the world's second-largest rubber producer, will increase its output by more than 20 percent to 3.6 million tons by 2015 to meet rising domestic and Chinese demand, the Indonesian Rubber Association said on Tuesday.

Within five years, domestic consumption of rubber in Southeast Asia's largest economy should jump to 20 percent of global production, said Suharto Honggokusumo, executive director of the association, known as Gapkindo. Indonesia produced 2.8 million tons of rubber in 2010, and he sees that rising between 6 and 8 percent this year.

"Before 2007, the [annual percentage] increases were around 10 percent," he said. "The economic situation got better in 2010. We need to improve the quality and increase the production in 2011."

The nation's domestic rubber consumption was 422,000 tons in 2010, and Suharto sees a 10 percent increase this year.

"This is normal. Like in China, economic growth is very fast," he said. "Everybody wants to have a better life, from bicycles to motorbikes, then to cars.

"We need to increase the local consumption. In 2015, we would like to have 20 percent of production consumed locally."

Global demand for rubber is forecast to rise to 26.1 million tons in 2011 from 24.4 million tons in 2010, the International Rubber Study Group said this month.

Tokyo rubber futures, which set global trends, jumped to a two-week high on Tuesday to finish at 433.9 yen ($5.35) per kilogram on supply concerns.

Soaring prices have encouraged farmers to try to tap as much latex as possible and even expand plantations, though the yield from new trees would only come in about five to six years.

Suharto said he had not heard of any cancellations or postponements of deliveries to Japan after its recent disaster. "It is business as usual," he said. "I don't think there is a major impact for us.