Rubber companies in Vietnam are facing a cloudy profit prospect for the remaining months as global demand falls and input costs surge.
Vietnam Rubber Group expects profit to flatten at VND5.34 trillion ($225.13 million) this year and revenue to rise a mere 5%, as prices have been falling due to low consumption while input costs have been rising.
Phuoc Hoa Rubber saw its second quarter profit dropping by a third to VND54.80 billion and revenue plunging nearly 50% to VND231 billion, while Da Nang Rubber Company saw profit falling nearly 22% to VND83.88 billion.
Both said that rising input costs and decreasing sales were the main reason for the profit drop.
Global rubber prices have fallen by a third year-on-year to around $1,750 per ton due to geopolitical tensions, the shortage of containers, rising transportation and slow customs clearance globally.
Vietnam export rubber prices had dropped by 7.6% year-on-year to $1,516 per ton in August, the fourth monthly fall in a row.
China, the biggest importer of Vietnam rubber, paid 9.3% less year-on-year at $1,474 per ton. The decline in consumption in China is said to be the reason for the drop.
But the Association of Natural Rubber Producing Countries is optimistic about the short-term prospect of the rubber market, as it estimates that the world is in short of 93,000 tons of natural rubber.
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