Rubberised roads project gaining traction
Shalini Kumar 
Rubber smallholders shy away from latex production as the process is long and tedious

THE government has been keen to promote the use of rubber in road construction to support the economic growth of the rubber industry. 

The rubberised roads project was first mooted in 2015. The project has been touted as a stimulus to the flagging rubber industry and to renew the hopes of the 440,000 or so rubber smallholders who have been impacted by the commodity’s downward price trend in recent years.

Prices of natural rubber have been declining since 2011-2012, when the SMR20 reached over RM17 per kg, due to a supply glut coupled with weak demand from top consumer China. On Jan 17, the price for SMR20 stood at RM5.915.

Natural rubber is seen as a preference to multiply the quality of asphalt for road construction and the use of the material will expand the use of rubber in the society and also the suitable industry.

Other than boosting the livelihood of rubber smallholders, among the potential beneficiaries for the rubberised roads projects include Greenyield Bhd, which is the only listed company to have a primary business in rubber planting/production.


Spurring demand for rubber

Greenyield is optimistic on the rubberised road initiatives but unsure of the impact on its business due to the lack of information.

“Any initiatives to boost the usage of rubber will be welcomed as it will spur demand for rubber leading to a likely positive impact on rubber prices. However, we are unable to comment on the expected impact of this initiative due to a lack of details on the proposed implementation plan,” its executive director Tham Kin On tells FocusM.

Greenyield’s plantation business segment contributed RM15.92 mil, which was about half of its total revenue of RM30.67 mil for the financial year ended July 31, 2017. The company turned in poorer performance in FY17 versus FY16 with its plantation business contributing RM16.49 mil to its total revenue of RM37.3 mil.

In FY17, its net profit fell to RM222,000 from RM2.53 mil in the previous year.

For the first quarter ended Oct 31, Greenyield suffered a net loss of RM568,000 from a net profit of RM24,000 a year ago despite posting a higher revenue of RM9.27 mil from RM6.71 mil.

The agricultural yield-enhancement player is diversifying its products to venture into oil palm plantations and houseware markets to reduce its dependence on existing markets.

It has a plantation-related business supplying products and services like fertilisers, tools and equipment, mainly to rubber plantations; and a non-plantation business that makes artstone plant pots.

Other companies with both palm and rubber plantation businesses could also benefit from the project.

Batu Kawan Bhd produces 12.98 million kg of rubber in the financial year ended Sept 30, from its own estates, while the total amount of rubber processed stood at 14.8 million kg. It has 12,255ha of rubber planted, which is 5% of its total planted area. The remaining 95% is planted with oil palm. Sale of rubber goods contributed RM140.7 mil to the group’s FY17 revenue of RM21.55 bil.

Sime Darby Plantation Bhd has 13,339ha planted with rubber as at end-June 30. Average yield from rubber amounted to 7.7 million kg in FY17. This worked out to an average of 1,845 kg/ha, down from 1,961 kg/ha in FY16.

The company has also been converting land previously planted with oil palm to rubber plantations. In Malaysia, a total of 4,400ha previously under oil palm has been replanted with rubber, and another 1,290ha is scheduled for conversion by June 30, 2018.


Pilot projects

The pilot project for rubberised roads has been conducted in five states, namely Kelantan, Pahang, Selangor, Kedah and Negeri Sembilan.

In October last year, a 3km stretch of rubberised road was constructed in Teluk Intan, Perak. This month, work began on a 20km stretch between Segamat and Yong Peng, Johor.

Malaysian Rubber Board (MRB) director-general Dr Zairossani Mohd Nor says the government has been supportive of the rubberised roads proposal, citing the 20km stretch of road in Johor as an endorsement by the Public Works Department (PWD).

Zairossani says hope still remains for the rubber industry, and it will continue to contribute to the economy

“We have also been given the responsibility to pave a 10km project in Pahang and another 10km in Teluk Intan for the first quarter of 2018,” he says.

These longer stretches of road will allow MRB to make a more meaningful assessment on the potential future commercialisation of the roads, as the pilot stretches have only been done for short distances.

The pilot tests have not only  been conducted on the public roads under PWD’s purview but also on private roads.

“The feedback has been positive as users are seeing the quality and durability compared to the normal roads,” he says.

Over the past two years, the MRB and PWD have been involved in a joint study to determine the effectiveness of using cuplump modified asphalt (CMA) for road construction or resurfacing works.

Cuplump is freshly-coagulated rubber, where the coagulation process takes place in the cup at the tree with no manufacturing process being involved; CMA is a mixture of bituminous cuplump and asphalt, which is a composite material that is mainly used for the paving of road surfaces.

However, it wasn’t exactly smooth sailing getting PWD on board with the project.


Adjustment period

Zairossani explains that the PWD needed a period of adjustment given that the construction of rubberised roads required a high level of technology, as well a need for strict adherence to procedure.

“It is just a matter of time when PWD and PLUS realise the usage will save cost in terms of durability and maintenance of the road surface. According to what we have seen, the amount of time needed between maintenance periods are extended and the savings add up to at least RM200,000 per km,” he says.

Given the decline in production volume, there are concerns whether plantations will be able to meet a potential increase in local demand for rubber driven by the initiatives MRB is undertaking.

Zairossani believes the industry will have no issues in keeping up with any increases in demand.

“Malaysia produces some 700,000 tonnes of rubber every year and using it to produce rubberised roads will see domestic demand grow by 10%, which we are more than able to meet.

“Usually when people talk about the shortfall in demand, that is for latex, which is imported from Thailand,” he says.

According to data provided on the Department of Statistics website, production of natural rubber for December last year had dropped 3.3% year-on-year to 67,125 tonnes, compared with 69,435 tonnes in December 2016.

Ultimately, Zairossani says, more needs to be done to promote latex production in Malaysia, which smallholders tend to shy away from as it is a very tedious process.

He explains that in 2016, downstream activities in the rubber industry needed 486,000 tonnes of natural rubber, while processing factories needed about one million tonnes for the export markets.

“With a current production of 633,000 tonnes, we need and have to import about 900,000 tonnes to fulfill both local and external demand. Of the total imports, 30% is in the form of latex and another 70% in the form of technically- specified natural rubber, ribbed smoked sheets and other forms.

“So we need both dry and wet latex, in order to sustain the industry,” he says.


Replanting grants

The government placed the rubber industry as one of the 12 National Key Economic Areas under the Economic Transformation Programme (ETP), with grants for replanting and new planting at RM9,230 per ha in Peninsular Malaysia, and at RM14,000 per ha and RM13,500 per ha respectively in Sabah and Sarawak.

Besides the ETP programmes, the government has also approved RM10 mil to increase latex production, with the allocated funds used to set up latex production infrastructure.

“The MRB has come out with programmes in the pipeline and will be implemented in the near term. There will also be joint projects with other agencies with the aim to increase latex production by at least 20,000 tonnes a year,” says Zairossani.

This article first appeared in Focus Malaysia Issue 272.