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As the second-largest rubber producer, Indonesia supplies a substantial amount of rubber to the global market. Since the s, the Indonesian rubber industry has been experiencing steady production growth. Most of the country&#;s rubber output &#; approximately percent &#; is produced by smallholder farmers. Government and private estates thus play a minor role in the domestic rubber industry.

Compared to its rubber producing competitors, Indonesia contains a low level of productivity per hectare. This is in large part due to the overall older age of its rubber trees in combination with low investment capability of the smallholder farmers, hence reducing yields. Whereas Thailand produces , kilogram (kg) of rubber per hectare per year, Indonesia only manages to produce , kg/ha. Also Vietnam (, kg/ha) and Malaysia (, kg/ha) have higher rubber productivity.

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 percent of total worldwide rubber consumption by (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 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 and late . Meanwhile, advances in the development of bio-based tires also pose a threat to the rubber industry.