Article from Phnom Penh Post - 26/02/2018
Europe-based international rubber firm Socfin is nearing completion on its first rubber processing factory in Cambodia’s Mondulkiri province. The Post’s Hor Kimsay spoke with Socfin General Manager Jef Boedt about the upcoming venture, the rubber sector’s problem with widespread rubber smuggling and the future of industry in the Kingdom.
You have unveiled plans to operate your first rubber factory this April. What can you tell us about the factory?
Today, 95 percent of the construction work of our factory is completed. The remaining 5 percent covers the final touches such as commissioning, testing and fine-tuning. Overall, we invested $5.7 million in the construction of the facility.
Upon completion, our factory will be able to process 16,000 tonnes of dry rubber per year. This is more than enough to cover our own field production and give us leverage to purchase the production of local smallholders, hence creating a long-term market for them. We have also designed the factory in such a way that it gives the opportunity to enlarge the processing lines and stocks if needed. This is an option for the future and will depend on the activities in the coming years.
Why did you decide to set up your own processing factory? How does this help your business?
Setting up our own factory has always been an integral part of our master plan. It will give us the opportunity to be independent and in full control of our own process (from harvesting on the field to processing and selling) and will help to maximise the return on our investment and future profits.
It is also part of our commitment to contribute to the development of infrastructures in Cambodia. Authorities have called for the development of more facilities to process raw materials such as rubber and cassava in order to reach the country’s development goal by 2025 and increase the value of the products it exports.
Does Socfin’s factory benefit family rubber farmers nearby?
Since the start of our activities (and as in all the countries we operate in) emphasis has been laid on integrating the local communities in our operations and sharing the benefits of our operations in the country. This is achieved by bringing in administrative and physical infrastructures, as well as with high investments in the area where we operate.
We already have a program integrating family rubber farmers in our activities. We provide them with training and technical assistance for technology transfer as well as with planting material. We currently work with around 50 smallholders through this project which are progressively starting producing rubber on their plots. Our factory will be in line with this commitment as it will provide a market for local smallholders as there is only one other rubber factory in Mondulkiri.
Are you worried about fluctuations in rubber prices, like those we’ve seen in the recent past? And do you expect prices to go up, down, or remain stable in the near future?
As a rubber producer company, we always hope that we can sell our product at the highest price. Unfortunately, there are fluctuations in prices, but this is not different for many other commodities. The rubber sector has always experienced fluctuations in prices as they depend on supply and demand from the sector. As a long-term investor with experience in our activity we have, through our history, faced ups and downs in the rubber industry. This is the kind of scenario we are well prepared for.
It is very difficult to say where the rubber prices are heading, but in my opinion, the probability of pricing going up are higher than the prices going down. They will most probably fluctuate between $1,400 and $1,600 per tonne in the coming months.
Despite an increase in rubber exports, widespread smuggling on the Vietnamese border has crippled potential profits for larger rubber producers. Does smuggling worry you or hurt the profits of your plantation?
Unfortunately, a lot of Vietnamese rubber traders are doing business around the boundaries of the different countries. As they are providing illegal business, they can operate with profit margins that are difficult to compete with. This situation gives them the opportunity to offer higher prices to the rubber sellers who get a price for their product that does not represent the real market prices. These activities are unhealthy for the country and for the rubber business as they can be deemed as illegal activities.
Of course for us, as a responsible rubber producer, it is difficult to compete with these illegal activities. We try to establish a bench market and hope smallholders who partner with us choose security and long-term partnerships instead of trading on the black market which is not sustainable for their future.
This interview has been edited for length and clarity.