Rubber (Natural)

There are two types of rubber, namely (1) natural rubber and (2) synthetic rubber. Natural rubber is made from the juice (latex) of the rubber tree, whereas the synthetic type is made from petroleum.

Both types are interchangeable and as such influence each other's demand (and price) on the international market; when the price of petroleum rises (making synthetic rubber more expensive), demand for natural rubber will increase. But when supply disruptions of natural rubber cause its price to rise, then the market tends to turn to synthetic rubber.

This section discusses Indonesia's natural rubber sector. Indonesia is the world's second-biggest producer of natural rubber as well as the world's second-biggest exporter (in both cases after Thailand).

Indonesia in Global Context

The rubber tree needs constant high temperatures (26-32 degrees Celsius) and a wet environment in order to be most productive. These conditions are found in Southeast Asia where the majority of the world's natural rubber is produced. Around 70 percent of global natural rubber production originates from Thailand, Indonesia, and Vietnam.

It takes seven years for a rubber tree to reach the productive age. Hereafter, it can produce up to 25 years. Due to the long cycle of the tree, any short term supply adjustments cannot be made.

Based on data from Statista, Thailand remained the world’s biggest natural rubber producer in 2023, with a natural rubber output of 4.71 million metric tons that year. On second place is Indonesia, with an output of 2.65 million metric tons.

Table 1; World's Top Five Natural Rubber Producers in 2023:

Country	Production (in tons)
1. Thailand	4,707,000
2. Indonesia	2,651,000
3. Ivory Coast	1,293,000
4. Vietnam	1,569,000
5. India	849,000

^{Source: Statista}

Natural Rubber in Indonesia

Production of Natural Rubber in Indonesia

As the second-largest rubber producer, Indonesia supplies a substantial amount of rubber to the global market. Since the 1980s, the Indonesian rubber industry has been experiencing steady production growth. However, table 2 shows that there has been a gradual decline in Indonesian natural rubber production after 2017.

Table 2; Indonesia's Natural Rubber Production, 2008-2024:

	2008	2009	2010	2011	2012	2013
Production (in million tons)	2.74	2.44	2.73	2.99	3.01	3.24

	2014	2015	2016	2017	2018	2019
Production (in million tons)	3.15	3.14	3.36	3.68	3.63	3.30

	2020	2021	2022	2023	2024	2025
Production (in million tons)	3.04	3.04	2.72	2.24	2.60*	n/a

^{* indicates a forecast by Gapkindo
Source: Badan Pusat Statistik (BPS)}

After hitting a peak in 2017, rubber production in Indonesia has been easing. While the slump in the 2020-2021 period was definitely highly impacted by the COVID-19 crisis (and a fungal disease), we unfortunately didn’t see a steep recovery to pre-pandemic levels after that crisis had ended.

Rubber Plantations in Indonesia

Most of Indonesia's natural rubber production comes from the following Indonesian provinces:

1. South Sumatra
2. North Sumatra
3. Riau
4. Jambi
5. West Kalimantan

South Sumatra is the biggest rubber supplier as it contributes between 25-30 percent to national rubber production.

Most of the country's rubber output - around 90 percent - is produced by the smallholder farmers. And so, the state-owned and big private estates therefore play a minor role in national rubber production.

What is interesting is that table 3 shows impressive growth in rubber production at the smallholder estates between 2002 and the present, while output at the big (private and state-owned) plantations have declined significantly. This implies that in terms of rubber production, Indonesia becomes increasingly dependent on the smallholders. Below, we explain why this is a risky situation.

Table 3; Natural Rubber Production in Indonesia per Producer Category:

	2002	2020	2021	2022	2023
Smallholder Estates (in tons)	1,226,647	2,784,011	2,826,246	2,509,312	2,046,052
Government Estates (in tons)	187,386	143,475	131,550	112,627	98,352
Big Private Estates (in tons)	199,687	109,662	87,518	95,142	96,422
Total (in tons)	1,613,720	3,037,348	3,045,314	2,717,081	2,240,826

^{Source: Badan Pusat Statistik (BPS)}

To understand the trends that are visible in table 3, we need to take a closer look at the rubber plantation size in Indonesia. The total size of Indonesia's rubber plantation area rose steadily between 2002 and 2021. In 2002, the country's rubber plantations covered a total of 3.34 million hectares. By 2021 the total national rubber plantation size had grown to 3.78 million hectares, particularly because of the expansion of smallholder estates thus helping to push national rubber production higher. However, a significant decline in the rubber plantation size occured after 2021, particularly due to the decline in the size of smallholder estates.

Table 4; Size of Rubber Plantations in Indonesia per Producer Category:

	2002	2020	2021	2022	2023
Smallholder Estates (in hectares)	2,825,476	3,368,186	3,433,275	3,263,127	2,850,196
Government Estates (in hectares)	244,339	132,882	129,254	128,764	122,879
Big Private Estates (in hectares)	274,529	225,105	213,957	165,200	179,670
Total (in hectares)	3,344,344	3,726,173	3,776,486	3,557,091	3,152,745

^{Source: Badan Pusat Statistik (BPS)}

Productivity of Indonesian Rubber Plantations

Based on tables 3 and 4, something interesting has been happening in Indonesia over the past two decades or so. While national rubber production has grown by 39.0 percent between 2002 and 2023, the size of total national rubber plantations has contracted by 5.7 percent (over the same period). What this means is that Indonesia produces more rubber on fewer plantations. In other words: rubber productivity has been improving markedly in Indonesia.

Typically, in Indonesia, a range of factors has been making its farmers (essentially of any agricultural commodity) less productive compared to regional counterparts. For example, Indonesia only manages to produce 1,088 kilogram (kg) of rubber per hectare (ha) in its top rubber-producing province of South Sumatra (and the national average is well below that level), while farmers in Thailand produce an average of 1,800 kg of rubber per ha. Meanwhile, also in Vietnam (1,720 kg/ha) and in Malaysia (1,510 kg/ha) the rubber productivity rates are much higher than in Indonesia.

Table 5; Rubber Productivity in Top Five Indonesian Provinces in 2023:

Province	Productivity (kg/ha)
1. South Sumatra	1,088
2. West Sumatra	1,020
3. Riau	1,019
4. Jambi	1,008
5. Central Java	1,003

^{Source: Badan Pusat Statistik (BPS)}

The key factors that have been holding back Indonesian farmers are the older age of their trees (hence being less productive), smallholder farmers‘ lack of expertise and technology, lack of financial readiness, and the lack of government support (in terms of providing soft loans to the farmers).

And so, despite productivity having clearly improved over the decades, a problem is that when big private and state-owned rubber plantations are on the decline, this sector becomes increasingly dependent on smallholders. The problem with these smallholders is that they generally lack the capital, technology, and expertise to optimize productivity (whereas the big estates typically have the financial resources to attract expertise, knowledge, and technology, including tree rejuvenation programs).

Global Rubber Price

As prospects of the rubber industry were positive thanks to the attractive global rubber price (which was particularly high in the 2005-2014 period, partly overlapping the 2000s commodities boom period, see the chart below), there was a shift away from commodities such as cocoa, coffee and tea, in favour of the establishment of palm oil and rubber plantations in Indonesia. Even after the 2000s commodities boom ended in 2012, the global rubber price remained favourable.

However, since late-2014 the global rubber price has been (more-or-less) going sideways at a level that is quite far from its recent record high position. And so, one could indeed wonder whether it is still that lucrative to be engaged in the production of rubber. This might explain why table 4 shows that rubber plantations sizes have been shrinking in size, quite significantly, over the past couple of years.

The global rubber price is particularly affected by demand from the tire industry as this industry accounts for about 60 percent of natural rubber consumption (hence is a major driver for rubber prices).

Global Rubber Price, July 1997 - December 2024 (in USD cents/kilogram):

Export of Indonesian Rubber

Around 75-80 percent of Indonesia's natural rubber production is exported, with the biggest export markets being Japan and the United States. Meanwhile, China, India and South Korea are also big offtakers of Indonesian rubber.

Table 6; Top Export Destinations for Indonesian Natural Rubber in 2023:

Country	Export Volume Market Share (% of total Indonesian natural rubber exports)
1. Japan	22.8
2. United States	21.6
3. China	12.3
4. India	8.2
5. South Korea	5.0

^{Source: Badan Pusat Statistik (BPS)}

Table 7 shows that rubber export volumes from Indonesia peaked in 2017, and then continuously eased up to 2022 (with the exception of 2021 when there was a small rebound after the COVID-19 crisis had peaked in 2020). This is unfortunate because the rubber exports (the whole upstream-downstream spectrum) bring in significant foreign exchange earnings for Indonesia

Table 7; Indonesian Natural Rubber Export Statistics:

	2020	2021	2022	2023	2024	2025
Export Volume (in million tons)	2.28	2.33	2.03	1.75	n/a	n/a
Export Value (in billion USD)	3.01	4.01	3.54	2.48	n/a	n/a

	2014	2015	2016	2017	2018	2019
Export Volume (in million tons)	2.62	2.63	2.58	2.99	2.81	2.50
Export Value (in billion USD)	4.74	3.70	3.37	5.10	3.95	3.52

	2008	2009	2010	2011	2012	2013
Export Volume (in million tons)	2.30	1.99	2.20	2.55	2.80	2.70
Export Value (in billion USD)	6.06	3.24	7.33	11.76	7.86	6.91

^{Source: Badan Pusat Statistik (BPS)}

There are 24 rubber products that are exported by Indonesia. However, only three are worthy to be mentioned here as the other 21 categories are insignificant. Still, among those three categories, one is completely dominant. Around 90 percent of all exported rubber products from Indonesia involves Technically Specified Natural Rubber (TSNR 20, with HS Code 40012220).

Table 8; Top Three Indonesia's Natural Rubber Exports (in tons):

Type	2020	2021	2022	2023
Technically Specified Natural Rubber (TSNR 20) (HS 40012220)	2,079,959	2,138,143	1,857,532	1,600,527
Technically Specified Natural Rubber (TSNR 10) (HS 40012210)	114,199	130,976	123,776	105,376
Ribbed Smoked Sheet Grade 1 (HS 40012110)	68,764	55,206	44,362	37,447

^{Source: Badan Pusat Statistik (BPS)}

Imports of Rubber into Indonesia

Although Indonesia has a clear trade surplus in terms of natural rubber (meaning that exports of natural rubber by far outperform imports of natural rubber into Indonesia), there has been a strong rise in imports of both natural and synthetic rubber over the past two decades (albeit coming from a low base).

Table 9; Imports of Rubber into Indonesia (Volume):

	2008	2015	2023
Import Volume Natural Rubber (in million tons)	12,587	32,747	178,605
Import Volume Synthetic Rubber (in million tons)	197,615	317,830	309,523

^{Source: Badan Pusat Statistik (BPS)}

Table 10; Imports of Rubber into Indonesia (Value):

	2008	2015	2023
Import Value Natural Rubber (in million US dollar)	24.1	41.2	150.4
Import Value Synthetic Rubber (in million US dollar)	510.5	559.5	664.6

^{Source: Badan Pusat Statistik (BPS)}

Challenges Faced by Indonesia's Rubber Sektor

As mentioned above, the main challenges that undermine rubber farming in Indonesia are:

- Indonesian natural rubber farming is less productive compared to regional counterparts, as smallholders account for most of production. These smallholders lack the most efficient farming techniques and have limited money to invest in new trees (tree rejuvenation), high-quality fertilizer, etc.

- Weak coordination and cooperation between the Agriculture Ministry, Industry Ministry and Trade Ministry is causing a very high degree of uncertainty for players in the rubber industry. Often, these ministries point at each other when action is needed, and so in the end nothing happens.

- Structural decrease in the size of rubber plantations in Indonesia since 2021 (which is related to the lower international rubber price), while it is tough to add new plantations (as it takes around seven years for rubber trees to start producing latex).

- Slow growth of Indonesia's manufacturing industry (particularly the automotive industry which absorbs about half of Indonesia's natural rubber production, followed by rubber gloves, rubber thread, footwear, medical gloves, carpets and other tools) undermines domestic demand for rubber.

- Rising imports of natural and synthetic rubber as the country depends on imports of processed rubber products due to the lack of domestic processing facilities and the lack of a well-developed manufacturing industry. 

Last Updated on 24 December 2024

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Difference between the various rubber terms:

Latex: this refers to any polymer in a water-based liquid or viscous state. The word by itself does not refer to natural rubber latex.

Natural rubber: includes all materials made from or containing natural latex. In other words, it refers to natural rubber latex, dry natural rubber, and synthetic latex or synthetic rubber that contains natural rubber in its formulation.

Natural rubber latex: a milky fluid that consists of extremely small particles of rubber obtained from plants, mainly from the rubber tree, dispersed in an aqueous medium. Products are then formed from natural rubber latex by dipping, extruding, or coating via the natural rubber latex process. Examples of products are medical gloves, catheters and tracheostomy tubes.

Dry natural rubber: this is rubber produced by the dry natural rubber process, which involves the use of coagulated natural latex in the form of dried or milled sheets. Products are formed from dry natural rubber by compression molding, extrusion, or by converting the sheets into a solution for dipping. Example of products that may contain dry natural rubber are syringe plungers, vial stoppers and injection ports on intravascular tubing.

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