Rubber (Natural)

Both types are interchangeable and as such influence each other's demand 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 rubber is produced. Around 70 percent of global natural rubber production originates from Thailand, Indonesia, and Malaysia.

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 2022, with a natural rubber output of 4.75 million metric tons that year. On second place is Indonesia, with an output of 3.13 million metric tons.

World's Top Five Natural Rubber Producers in 2022:

Country	Production (in tons)
1. Thailand	4,750,000
2. Indonesia	3,130,000
3. Vietnam	1,290,000
4. Ivory Coast	1,290,000
5. China	850,000

^{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.

Indonesian Natural Rubber Production:

	2020	2021	2022	2023	2024	2025
Production (in million tons)	2.88	3.12	3.14	3.19*	2.60*

	2014	2015	2016	2017	2018	2019
Production (in million tons)	3.15	3.15	3.31	3.68	3.63	3.30

	2008	2009	2010	2011	2012	2013
Production (in million tons)	2.75	2.44	2.73	3.09	3.04	3.24

^{¹ indicates a forecast
Sources: Badan Pusat Statistik (BPS)}

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

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

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

Natural Rubber Production in Indonesia per Producer Category:

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

^{Source: Indonesian Rubber Association (Gapkindo)}

The total size of Indonesia's rubber plantation area has risen steadily over the past two decades. In 2002, the country's rubber plantations covered a total of 3.34 million hectares. By 2022 the total national rubber plantation size had grown to 3.56 million hectares, particularly because of the expansion of smallholder estates. This has helped to push rubber production higher.

Size of Rubber Plantations in Indonesia:

	2002	2010	2015	2020	2022
Smallholder Estates (in hectares)	2,825,476	2,948,745	3,075,627	3,368,186	3,263,127
Government Estates (in hectares)	244,339	259,500	230,168	132,882	128,764
Big Private Estates (in hectares)	274,529	237,170	315,308	225,105	165,200
Total (in hectares)	3,344,344	3,445,415	3,621,103	3,726,173	3,557,091

^{Source: Indonesian Rubber Association (Gapkindo)}

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

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

Export of Indonesian Rubber

Around 65 percent of Indonesia's rubber production is exported. Almost half of Indonesia's natural rubber export volumes are shipped to Japan and the United States. Meanwhile, China, India and South Korea are also big offtakers of Indonesian rubber.

Top Export Destinations for Indonesian Rubber in 2022:

Country	Export Market Share                (%)
1. Japan	23.9
2. United States	22.7
3. China	7.6
4. India	5.5
5. South Korea	5.0

^{Source: Badan Pusat Statistik (BPS)}

Domestic rubber consumption in Indonesia is mostly done by Indonesia's manufacturing industry (in particular the automotive industry). Considering the country's manufacturing industry has difficulty to expand significantly, domestic rubber consumption is also rising at a slow pace only.

Indonesian Rubber Export Statistics:

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

	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).

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

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

^{Source: Badan Pusat Statistik (BPS)}

Challenges Faced by Indonesia's Rubber Industry

In Indonesia, a number of factors have been making its farmers (essentially of any agricultural commodity) less productive compared to regional counterparts. For example, a few years back we reported that Indonesia only manages to produce 1,080 kilogram (kg) of rubber per hectare (ha), while farmers in Thailand produce 1,800 kg of rubber per ha. Meanwhile, also in Vietnam (1,720 kg/ha) and in Malaysia (1,510 kg/ha) the productivity rates are much higher.

Key (structural) factors that have been holding back Indonesian farmers are the older age of their trees, 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, 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).

[This page is being updated, 28 June 2024]

Indonesia's downstream rubber industry is still underdeveloped. Today, 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. Little domestic consumption of rubber explains why Indonesia exports about 85 percent of its rubber production. However, in recent years there is a change visible (although a slow one) as exports slightly decline on the back of increased domestic consumption. About half of the natural rubber that is absorbed domestically in Indonesia goes to the tire manufacturing industry, followed by rubber gloves, rubber thread, footwear, retread tires, medical gloves, carpets and other tools.

Being the world's largest rubber importer, policies in China can have far-reaching effects on the global rubber industry. In late 2014 the government of China decided to approve a new standard for compound rubber imports. The permitted crude rubber content in imported compound rubber was cut from 95-99.5 percent to 88 percent, implying that compound rubber imports into China became subject to a 20 percent import duty (the same tariff as natural rubber import duties). China’s new policy is a blow to its rubber suppliers in Indonesia as it results in declining usage of compound rubber in the world’s second-largest economy.

Another problem was that the USA removed Indonesian-made tires from its generalized system of preference. This US program was designed to support developing countries by cutting import duties and taxes for about 5000 products from 123 countries. Indonesian-made tires were removed from the list as the USA believes that Indonesia’s tire industry is already sufficiently competitive. This means that tire exports to the USA are now subject to a five percent import tax.

Market Trends, Challenges & Rubber Price

A key driver for the global rubber market is the Asia-Pacific region where demand is growing robustly, led by China, the world's leading rubber consumer that is expected to account for nearly 40 percent of total worldwide rubber consumption by 2021 (mostly used in its tire manufacturing industry). Meanwhile, strong growth in rubber consumption is also expected to occur in Indonesia, India, Vietnam, and Thailand on the back of developing automotive industries in these countries.

Like most other key commodities, international rubber prices have been under pressure after 2011 amid weak global economic activity (which impacted negatively on the automotive industry) as well as a natural rubber supply glut. Moreover, low crude oil prices made synthetic rubber very competitive, hence the natural rubber price sunk significantly between early 2011 and late 2017. Meanwhile, advances in the development of bio-based tires also pose a threat to the rubber industry.

The first chart below shows the steep decline of the natural rubber price starting from early 2011 due to the rubber supply glut, sluggish economic growth and fierce competition from synthetic rubber.

Rubber Price - 1st Chart (Bloomberg data):

The second chart shows a steep recovery in the natural rubber price in the last quarter of 2017 and start of 2018. The reason behind this price increase are supply disruptions in Thailand. Massive and widespread floods in the southern part of Thailand, where most of the nation's rubber cultivation takes place, had a big impact on the natural rubber supply (both production and distribution). Severe drought was also cited a reason for weak rubber production in Thailand.

Rubber Price - 2nd Chart (Bloomberg data):

The world's leading rubber producing nations - Thailand, Indonesia and Malaysia - have also agreed to curtail their rubber exports through the Agreed Export Tonnage Scheme (AETS) in an effort to boost international prices. This first started in late-2012. The decline in Chinese rubber demand is one of the key reasons for implementing the AETS.

Updated on 5 April 2018