Analysis of the impact of the UDR Act on the future supply structure of natural rubber Source: Longzhong Information The EU Zero Deforestation Act (EUDR) is a new legislation in the European Union that aims to limit deforestation and forest degradation caused by the expansion of agricultural activities on a global scale. The Act stipulates that the EUDR covers certain goods supplied to or exported from the EU market and products produced from goods (including natural rubber and rubber derivatives such as tires), and the EUDR requires that the selected goods must be of legal origin, must come from land that has not been deforested after December 31, 2020, and that companies must minimize the risk of illegal and deforestation before placing products on or exporting products from the EU market. The EUDR Regulation will come into force on 30 June 2023 and will be mandatory for all businesses to comply with the EUDR on 30 December 2024, with an 18-month transition period for enterprise applications to adapt to the new regulations, a longer adaptation period for small and micro businesses, and other specific provisions, and all small and micro businesses after 30 June 2025 must comply with the EUDR Regulation. So will the EUDR have an impact on the future supply structure of natural rubber? First, the attitude of the main natural rubber producing countries to the bill
The top five natural rubber production in the world in 2023: Thailand, Indonesia, Viet Nam, Côte d’Ivoire, China.
According to Longzhong information, at present, in response to the EUDR law, the main producing countries have different attitudes towards EUDR, according to market research and feedback from relevant insiders, Thailand and Côte d’Ivoire expressed their willingness to comply with EUDR, the Thailand government attaches great importance to this matter, believes that the new EU regulations are an excellent opportunity to enhance Thailand’s global trade competitiveness, and strive to generate income and increase prices for Thailand rubber farmers; Côte d’Ivoire sees the EUDR as an opportunity to lobby the EU for increased financial support to reduce deforestation by the end of 2024 and will be 100% ready to meet all EU legal requirements by the end of 2024.
However, Indonesia and Malaysia have cooperated to counter EUDR, and Indonesia’s opposition to EUDR is stronger, and opposition is more focused on its main export commodity, palm oil, and the implementation of EUDR in Indonesia and Malaysia may be further delayed. Second, the global import volume of natural rubber in the
European Union In 2022, the EU will import 1.354 million tons of rubber annually, and Thailand, Malaysia, India and Vietnam + Kote will account for 88.2% in total. From January to October 2023, 870,000 tons were imported, with India, Malaysia, Thailand, Vietnam + Kote accounting for 87.7% in total. Among them, the proportion of Indonesia is decreasing year by year, and the proportion of Kote is increasing year by year. From the above data, Thailand, Indonesia and Kote have a major presence in the EU market. From the source, in line with the EUDR raw materials after all, after all, a few, Thailand and African production areas focus on the production and export of rubber in line with the EU Act, in the face of higher profits, raw materials and finished product prices will inevitably rise strongly, according to Longzhong information Thailand visit research understands, the implementation of this regulation, on the basis of meeting the conditions of the rubber price or will rise by about 300 US dollars / ton, is bound to stimulate the tire factory price rise, then the long-term pricing of overseas tire factories will be affected by the EUDR law. 3. Uncertainty in the Bill At present, the main problem encountered in the implementation of the EUDR is the difficulty of traceability, the main production area of natural gum is in Southeast Asia, and smallholder farmers produce a large number of forest-related commodities in the region, but many smallholder farmers lack the technical capacity and financial capital to meet the onerous due diligence requirements of the new rules to achieve traceability. Moreover, cross-border trade in Southeast Asia is complicated, which increases the difficulty of tracing the source. The bill stipulates that the glue that meets the requirements for export to the EU must be certified from the beginning of the plot (non-forest area) – storage, sales, storage and traceability – and can only be sent to Europe. According to Longzhong information, the demand of several major international tire factories in the EU is estimated to be 2 million tons, and the estimated annual volume of production in line with the EUDR is about 600,000 tons
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