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15 July 2009

Oil hike boosts Vietnam’s natural rubber segment

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Companies in the natural rubber industry are set to boom on the back of oil prices that have pushed up costs at synthetic manufacturers, a the Thanhnien news online reported, citing a Hanoi-based brokerage.

Natural rubber’s arch rivals, synthetic rubber producers, rely heavily on petroleum-based fuel in production and have been hit hard by price hikes, according to Thang Long Securities Co.

Natural rubber providers made large profits last year thanks to increases in the price of global crude oil that cut into the business of synthetic rubber makers. Prices struck a record peak over US$147 per barrel on July 11 last year, according to AFP.

But prices then slumped to below $40 per barrel at the end of 2008 as the global economic crisis sent demand for energy tumbling. The demand cut forced natural rubber companies to issue low earning forecasts for this year.

Oil prices have rallied to over $60 per barrel and rubber latex prices jumped to around 30 million dong ($1,685) a ton in May, up from 21- 22 million dong at the end of 2008.

Most natural rubber firms could expect gains so long as latex prices stayed above 17-20 million dong per ton, said Bui Phuoc Tien, deputy director and chief accountant at Hoa Binh Rubber Joint Stock Co. (HRC).

Analysts at Thang Long said all three rubber producers listed on the Ho Chi Minh Stock Exchange posted high earnings per share (EPS) rates over the last three years. They include HRC, Dong Phu Rubber Joint Stock Co. (DPR) and Tay Ninh Rubber Joint Stock Co (TRC).

The prospects for the three stocks were good as crude oil was expected to move up in the long-term and the demand for rubber products continues to rise, the analysts said, without giving further details.

Statistics from the brokerage said plantations older than 10 years old accounted for more than 60 percent of the three companies’ total rubber tree growing area. The analysts said this means output would continue to be high at all three firms.


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