Sri Trang Group plans to double its rubber production capacity within the next five years with a goal to be a leading player in the regional trade, the Bangkok Post reports.
The company is responding to the favourable outlook for the rubber industry, in line with the global economic recovery that is spurring huge demand for natural rubber products in the automobile industry, especially from China.
The five-year plan from this year would double the group's production capacity to 20 billion gloves a year, and 160,000 tonnes of other products, mainly block rubber or technically specified rubber (TSR), said Kitichai Sincharoenkul, executive director of Sri Trang Agro-Industry Plc (STA), the group's SET-listed flagship.
"Natural rubber is a commodity and to stay competitive, we must have market share that rises along with the industry, or even higher," he said.
Rubber prices collapsed to about US$1,000 per tonne in December 2008, from a peak $3,500 in July on the same year, after the onset of the US financial crisis.
However, the economic recovery last year revived demand in the automobile industries of many countries, pushing TSR prices up steadily. They are currently trading around $3,200 a tonne.
China last year reported sales of 13.6 million automobiles, surpassing the United States as the world's biggest market, compared with a total of 9.38 million a year earlier.
The rapid growth has made China the world's biggest rubber consumer with annual demand of 2.5 million tonnes, or 30% of global consumption, according to Mr Kitichai.
Meanwhile, the H1N1 flu pandemic has raised health concerns and driven sales of medical rubber gloves.
"Of the approximately 10 million tonnes of rubber used worldwide, 35% is used for making rubber gloves for industrial, commercial and medical uses," he said.
The outlook is further improved by expected limited supply from the top three producing countries _ Thailand, Indonesia and Malaysia _ due largely to climate change and the El Nino weather phenomenon this year.
The Thai Rubber Association expects export prices of ribbed smoked rubber sheets (RSS) to increase by 30% this year, from an average $1,880 a tonne last year, or about 63-64 baht per kg.
"Considering to these favourable factors, it encourages us to expand investment both in the form of organic growth or expansion of existing operations, and through acquisitions," Mr Kitichai said.
This year, the company plans to set up a new TSR processing plant in Nong Khai, in the northeast, the new rubber production hub of the country.
The plant, worth 350 million to 400 million baht, has a capacity to produce about 50,000 tonnes of rubber products a year.
The next destination is probably Buri Ram in the same region, where a number of rubber plantations promoted by the government since 2004 would start producing yields.
In terms of acquisitions, Sri Trang plans to buy production plants in Indonesia, a second production base, where the group has been investing for five years in South Sumatra.
It completed a deal to spend 200 million baht to buy a rubber production plant in Kalimantan two years ago, and a new site is being considered to enlarge production in the region.
Mr Kitichai said the group had set aside about one billion baht for expansion per year, with part of the funds to expand rubber glove capacity at local plants and in Shanghai.
STA reported revenue of 60.58 billion baht in 2008, up from 50.31 billion the year before due to extraordinarily high rubber prices. In the first nine months of 2009, revenue declined 40% year-on-year to 29.84 billion baht, with net profit of 959 million, down 7%.
STA shares closed on January 21 on the Stock Exchange of Thailand at 26.50 baht, down 1.75, in trade worth 44.96 million baht.
(Source: irco.biz)
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