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Drought in Southwest China cuts rubber output, raises costs

A drought that began in the autumn of 2009 is hurting China’s industrial sector, despite affecting mainly agricultural provinces in the southwest.

Productivity in the export manufacturing industries and, consequently, delivery lead times may be significantly impacted. Although China’s southwestern provinces are traditionally agricultural, industrial sectors are also located in the region. Yunnan, for instance, is one of the country’s largest manufacturers of rubber. Last year, the province turned out 302,000 tonnes of raw rubber, contributing nearly 39 percent of China’s annual yield.

The drought, however, is curtailing volume, which is projected to decrease 10-20 percent if the situation does not improve before June. China already imports rubber to meet its requirements from Indonesia, Malaysia, Thailand and Vietnam. But the drought affecting the country’s southwest is felt by all areas along the Mekong River.

Demand for rubber, meanwhile, continues to grow alongside heightened production of tires. As a result, the cost of natural rubber increased to CNY25,000 (USD3,660) per tonne in April, up 12 percent from just two months earlier. There is concern among local rubber-products manufacturers that input costs might soar to record highs in H210 if the drought does not ease this month.