Global factors affect rubber demand, and the imbalance between supply and demand in Vietnam's rubber industry intensifies

News on May 25, recently, according to Vietnamese media reports, Vietnam's rubber industry is facing increasing difficulties. Affected by global unfavorable factors, including declining rubber demand and unbalanced supply and demand, Vietnam's rubber production and trading companies are facing difficulties in all aspects. The industry's difficulties are mainly reflected in the decline in rubber prices and order volumes, which has brought tremendous pressure on companies.

Huynh Van Bao, vice chairman of the Vietnam Rubber Association, said that Vietnamese rubber companies have suffered serious funding shortages, which has put them in trouble. In addition, since most of Vietnam's rubber is exported, China's consumption only accounts for 15% of total output. The decline in global rubber demand has further exacerbated the imbalance between supply and demand.

Global rubber production exceeds 14 million tons per year, and the demand is almost equal. However, recent unfavorable factors such as inflation, rising interest rates and armed conflicts have led to a decline in both rubber production and consumer demand, making rubber companies face huge challenges.

At the same time, rubber companies are also facing difficulties in terms of human resources. Due to the deteriorating financial situation, it is difficult for companies to provide higher wages, and the average monthly income of workers is only about $230. Coupled with difficult working conditions, many workers had to quit their jobs and seek other opportunities.

It is understood that the tax refund issue has also become a major problem plaguing Vietnamese rubber companies. Many natural rubber exporting companies report that despite multiple applications, they have not received approximately US$10.8 million in value-added tax refunds. This puts greater pressure on the company's financial situation.

As one of Vietnam's leading natural rubber producers and exporters, Hoa Thuan Trading Co., Ltd. is also deeply troubled. The company was recently forced to lay off employees and temporarily suspend production due to the gradual decline in order volume, which caused the company's revenue to drop by 94% in 2022. In addition, the company has not received a $2.1 million tax refund, putting it in severe financial trouble. Faced with various expenses such as corporate income tax, bank interest and workers 'wages, the company sent requests for help to various regulatory agencies, but did not receive a reasonable response or supporting policy to help them tide over the difficulties.

Tan QuangHuy, general manager of Huy Brothers Co, another rubber company, said that despite insufficient orders, as a raw material, they may continue to maintain operations until the market changes. However, the lack of tax rebates means the company is unsustainable.

Tan QuangHuy added that the company has been running its business efficiently so that it can meet tax obligations and create jobs for workers. He hopes that relevant management agencies can resolve outstanding issues as soon as possible and provide support to help companies resume normal operations as soon as possible.

Faced with the current difficulties, Vietnamese rubber companies are in urgent need of financial support and tax refund solutions to maintain the sustainability of production and operations.