The fall in the price of rubber on the international market since 2015 has made domestic farmers scream because the selling price is only around Rp. 6,000 per kilogram. However, the condition has helped a little because the production can be absorbed domestically.
This happened after the government decided to use rubber asphalt as a raw material for road infrastructure projects. Rubber asphalt is a mixture of asphalt with rubber-based additives added at a certain dose. In a more general context, rubber asphalt belongs to the polymer-modified asphalt group.
Rubber can be in the form of fresh rubber in pre-vulcanized latex or rubber compound and rubber powder from waste tires. The addition of rubber components in asphalt makes the quality of rubber asphalt superior to pure asphalt. The rubber material in the asphalt causes the asphalt to become more elastic so that it can withstand heavy traffic loads, does not melt quickly, especially when the weather is hot during the day, and is more sticky with aggregates so that the road surface does not quickly crack and have holes.
In terms of price, even though it is sold at a 20% higher level, rubber asphalt can provide a service life of 1.5 to 2 times longer than pure asphalt. Thus, the use of rubber asphalt will save costs. Efforts to use rubber asphalt have been discussed since 2016 and have been carried out more intensely since 2019 in line with the agreement of the three largest rubber-producing countries in the world to find solutions to overcome the fall in rubber prices.
In 2019, three countries (Thailand, Indonesia, Malaysia) that are members of the ITRC agreed to implement the Agreed Export Tonnage Scheme (AETS) instrument to reduce exports of natural rubber to increase these prices commodities on the world market. The government’s efforts to find solutions to overcome the fall in rubber prices by applying the concept of rubber asphalt are also triggered by the position of rubber commodities which are very important in their contribution to the national economy.
The national rubber processing industry sector contributed significantly to foreign exchange earnings, reaching US$ 3.422 billion in 2019. Currently, there are 163 natural rubber industries with direct labor absorption of 60,000 people. Meanwhile, natural rubber production in 2019 reached 3.3 million tons, including SIR (crumb rubber), concentrated latex, and RSS (ribbed smoked sheet). Of this amount, 20% is processed domestically by the downstream industry into tires, retreads, footwear, rubber articles, and other manufactured rubber goods (MRG), while 80% of natural rubber is exported.
Data from the Ministry of Industry shows that natural rubber production has only fulfilled around 55.4 percent of the sector’s installed capacity, which reached 5.9 million tons. One of them was influenced by the world natural rubber price, which fell to its lowest level since 2011, which reached US$1.36 per kg.
One of the causes of the low price of natural rubber is the oversupply of these commodities and the declining demand in the global market. This condition affects the welfare of rubber farmers, decreases net income from rubber companies, and decreases the value of exports. One of the efforts made by the government to increase the price of natural rubber is by increasing the absorption by the domestic industry of rubber commodities.
In 2019 the Directorate General of Highways, Ministry of Public Works, and Public Housing absorbed latex rubber asphalt in nine provinces with a volume of 1,271.10 tons with a road length of around 65.56 kilometers.
Meanwhile, in 2020, the government allocates a budget of around Rp 120 billion for the rubber asphalt program, and in 2021 the budget for absorption of rubber asphalt will reach Rp 130 billion.
Challenges
The implementation of reducing the supply of rubber exports through the rubber asphalt program has proven to positively impact the movement of rubber prices in the international market. Gradually, rubber commodity prices in the international market experienced an upward trend. At the end of 2020, rubber prices moved in the range of US$149 cents to US$158.50 cents per kilogram. That price is better than its position at the end of 2019, which was around US$ 130 per kilogram.
Even so, some challenges still hinder the smooth implementation of the rubber asphalt program in the country. The use of natural rubber in asphalt, he continued, is still in tiny volumes. Therefore, for absorption on a large scale, a truly tested technology is needed. Downstream of the rubber industry in the form of a rubber processing plant for asphalt is still minimal. Currently, there is only one pre-vulcanized latex-based rubber asphalt processing plant located in Musi Bayuasin.
The rubber asphalt processing factories must be expanded so that the absorption of rubber asphalt can be carried out optimally following the budget target set. In addition, the government must also increase its contribution in researching the use of Standard Indonesian Rubber (SIR) 20 type rubber for rubber asphalt. This is needed in order to produce high-quality rubber for asphalt mixtures.
What is even more critical is how to change the culture of rubber farmers from just collecting sap and then drying it to be used as bokar and then switching to making latex, something that is not easy. Farmers are used to making bokar, collecting sap by tapping, then drying it for three weeks to get bokar with a dryness rate of 60%. Meanwhile, to produce latex, farmers have to tap in the morning to make sure the sap is clean (without mixing with dirt) so that when it is put into the centrifuge machine, the water separation process is carried out quickly, in approximately one day.
GAPKINDO Newsletter team