The initiative of several tire factories in the world to make natural rubber sustainable through the Global Platform for Sustainable Natural Rubber was questioned by GAPKINDO (Rubber Association of Indonesia). In that letter to the Director of GPSNR, Stefano Safi, former director of the RSPO, GAPKINDO, stated how rubber’s future can be sustainable amidst deteriorating economic conditions.
Restrictions in many countries have affected tire manufacturers as well. They postponed the purchase of natural rubber from rubber factories in Indonesia. This condition significantly affects the cash flow of crumb rubber factories in Indonesia. The crumb rubber factory has been buying raw materials from farmers. Around 2.5 million farmers and their families depend on rubber. Indonesian rubber farmers are currently experiencing a decline in production due to Pestalotiopsis coupled with lower prices due to reduced demand. In this condition, survival is much more important than sustainability. The GPSNR members have to do something.
The economic pillar of sustainability must be paid more attention than the other two pillars. Overcoming the crisis in the rubber economy must involve all parties involved in it. The future of sustainable natural rubber will not be achieved if farmer’s economy is unhealthy. There must be equality that is mutually beneficial in the supply chain.
GPSNR has not responded yet to GAPKINDO’s letter. With current economic conditions, Indonesia’s natural rubber exports during the first quarter of 2020 are still expected (up 4.5%) compared to 2019. However, throughout 2020 it is estimated that it will decline significantly by 7.1%, from 2,582 tonnes in 2019 to 2,339 tonnes in 2020. Indonesian natural rubber production also fell by 0.4% during the first quarter of 2020 compared to 2019. In 2020 it is estimated to decline quite significantly 12.6%, from 3,301 thousand tons in 2019 to 2,885 thousand tons.
Even though the crumb rubber factory has had excess capacity so far, its utilization has decreased. The factory utilization in 2018 was 61.8%, in 2019 56.2%, and in 2020 it would be 48.1%. As a result, the higher the cost efficiency, the higher the processing costs. There is no room to include this cost efficiency in the export price. Farmers share the responsibility for the lower price of Bokar. The competitiveness of the crumb rubber industry is also lower than in other countries. The Indonesian rubber industry is dominated by SIR production (97.6%). The most dominant is SIR 20 94.2%,
To not depend on the export market, it is necessary to downstream so that more rubber is absorbed domestically. However, according to the industry, the downstream industry built is solid rubber-based (SIR 20).
On that occasion, Mahmudi, Director of Production and Development of Holding PTPN 3, stated that Holding PTPPN 3 currently owns 145,000 ha of rubber plantation or 16% of the total plantation area. The crumb rubber factory has reached 60 units. Rubber contributed revenue for holding amounting to IDR 3.3 trillion or 9% of PTPN’s revenue. The problem with PTPN is that the HPP has increased while the selling price has decreased.
Operational excellence is not optimal because it focuses on HR costs. If action is not taken, the productivity potential will decline further, and factory utility will be low. As a result, high financial costs and many other side effects.
In 2015, HPP for plantations was Rp. 16,400 / kg, while the selling price was still Rp. 18,909, so there was still a margin, production of 183,965 tons. In 2019 HPP for the plantation reached IDR 20,150 / kg, while the selling price was IDR 20,945 / kg, the margin was tiny, production was 145,572 tons.
From 2015-2019 HPP increased by 123%, while prices only increased by 110%, and production was only 80%. In 2020, rubber has lost IDR 4500 / kg or the commodity with the most massive loss.
So far, PTPN has experienced difficulties in harvesting labor, especially in this Covid-19. In 2019, there is a shortage of 8,000 harvesters while March, April, May this year is 10,000 harvesters. PTPN in Central Java, PTPN 9, and in East Java, PTPN 12 harvesters come from other regions. During the Covid-19 pandemic, where restrictions were made, it made it even more difficult. As a result, productivity decreases, making it difficult to get revenue.
In February-April, the PTPN rubber storage warehouse was full of delays in shipping to export destination countries due to lockdown. However, May and June have decreased because the United States and China absorbed it. To get less bloody, a business portfolio is carried out so that it can reach an optimum area. The rubber plantation area will be reduced so that only 100,000 tons are left. Farms whose productivity is below 1.7 tonnes/ha will be felled and replaced with other plants.
PTPN in Java will be replaced with sugar cane because Indonesia is still short on imports. Meanwhile, in Sumatra and Kalimantan, it is replaced by oil palm. The way to restructuring at all stages to reduce high costs is not always easy. The main problem is the workforce, while PTPN is trying to possibly not layoffs. There is an excess of 17,000 workers that have been temporarily diverted to cover the shortage of harvesters.
Finances were restructured because ebtida was very thin. The factory’s utility was increased from 60% to 80% by closing some of the low utility factories and transferring them to other factories. To meet the factory capacity, bokar was also purchased from the plasma and surrounding rubber farmers. The increase in efficiency in the plantation is carried out with the assistance of the Indonesian Rubber Research Center / PT Research Plantation Nusantara, namely the tapping system, LFT (Low Frequent Tapping, and stimulants based on climate characters.
Currently, this has been done in PTPN 9 Gambus plantation. Besides, IT-based operational supervision is also carried out. Downstream was also carried out by inviting investors to PT Industri Karet Nusantara, which produces rubber thread, respirene, and rubber article for the cement, latex, rubber, sugar factories, aluminum, PKS, and other industries.
Currently, PTPN is holding 99.9% and hopes that new investors will enter. Thomas Wijaya from the Indonesian Rubber Research Center / PT Research Plantation Nusantara stated that the April 2020 RSS3 price is IDR 19,500 kg, while the production costs vary from IDR 16,540 – 20,500. So there are gardens with thin profits, some with significant losses. To overcome this must be efficiency through reducing costs and increasing productivity.
The most significant cost component in rubber plantation is harvesting, collection, and transportation to the factory, reaching 63.7%. The Rubber Research Center introduced a low-frequency tapping system to reduce harvest costs. The frequency of tapping is d4, with a 4% stimulant to overcome the shortage of tappers. Productivity is almost the same as d3.***
Media Perkebunan, 13/07/2020