Being the world&#;s largest rubber importer, policies in China can have far-reaching effects on the global rubber industry. In late 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 -. percent to percent, implying that compound rubber imports into China became subject to a 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 products from 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.

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.

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.

Rubber, known for its elastic quality, is a commodity that is used in many products and applications around the globe (from industrial to household products). There are two types of rubber, to wit natural rubber and synthetic rubber. Natural rubber is made from the juice (latex) of the rubber tree, whereas the synthetic type is made from petroleum. Both types are interchangeable and as such influence each other&#;s demand; when the price of petroleum rises, 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 one of the largest producers and exporters of natural rubber.