To tap the Chinese rubber market more effectively, the Thai government and rubber-exporters should adopt niche-marketing strategy by supplying giant automotive manufacturers with rubber products, according to the findings of a recent study.

Rubber is one of three products for which the logistics and supply chain for exports to China are being studied under a programme supported by the Thailand Research Fund. A study of the export of Thai fresh fruit was published on June 11.

The study of rubber exports found many obstacles at all logistical levels, from transportation, both domestic and international, to distribution channels in China.

Dr Karndee Prichanont, director of Thammasat Business Consulting Centre, said the study had found that the rubber products exported to China were too widely distributed, translating into higher logistics costs due to the different fees and customs procedures in each province.

She suggested the government focus on industries with potential demand for rubber, such as automotive and related industries. More than 70 per cent of China's rubber demand is for use in such industries, most of which are located in Liaoning and Jilin.

"[China's] demand is expected to be five times greater than Thailand's [current] rubber supply of 600,000 tonnes a year by 2015," said Karndee.

She said the Thai government and exporters should negotiate with Liaoning-based tyre firms like Michelin, Goodyear and Bridgestone, or Ford, Chrysler, Siemens and Volkswagen in Jilin, to ship rubber jointly via Dalian port in Liaoning.

The joint effort to reduce logistics costs should include building warehouses to distribute the rubber from Liaoning, so that Thai exporters are not reliant on the three main ports used currently, Qingdao, Shanghai and Hong Kong, she said. The study found that before shipping to China, many exporters transported the rubber from the main production area in south Thailand to Laem Chabang port or Bangkok port by truck or south to ports in Malaysia and Singapore by train, instead of through Songkhla or other large domestic ports.

Duangpun Kritchanchai, coordinator of the logistics and supply chain research programme, said the reason exporters chose these transport options was that Thailand had no developed domestic shipping network, resulting in water transport being more expensive than rail or truck transport, despite the lower fuel costs.

The case study, led by Charoenchai Khompatrapron of King Mongkut's University of Technology Thonburi, found that the logistics cost from farm to Shanghai port was Bt26,750 to Bt42,410 per 20-foot equivalent unit (TEU) container, or Bt1.34 to Bt2.12 per kilogram, and Bt26,030 to Bt43,130 per TEU or Bt1.3 to Bt2.14 per kilogram to Qingdao.

Assistant Professor Dr Thananya Wasusri of King Mongkut's University of Technology Thonburi said the lowest logistics cost was achieved by transporting the rubber to Penang port via the Padang checkpoint in Songkhla and from there to Qingdao, with total costs of Bt26,030 per TEU, or Bt1.3 per kilogram, and a transit time of 17 days. The costliest route was Nakhon Si Thammarat via Bangkok or Laem Chabang to Hong Kong and on to Qingdao, with costs totalling Bt43,130 per TEU, or Bt2.16 per kilogram and 12 days in transit.

She said trucks accounted for most of the domestic transport of 2.6 million  tonnes of rubber in 2005, at 88 per cent, followed by trains at 9 per cent and coastal ships at 3 per cent.

The research head suggested that the state find ways to make domestic transport by ship more convenient and cost-efficient to encourage rubber-exporters to use this method.

Thananya said the government should award concessions to the private sector to operate seaports so as to ensure greater efficiency. For example, Songkhla lacks equipment for loading goods, such as forklifts and quayside gantry cranes.

She said the coastal shippers should pay lower port charges than international ships at Laem Chabang instead of the same rate as at present. Rubber-exporters pay port charges of Bt715 per TEU, which is twice the actual transport cost by train.

Thailand has ports in only Surat Thani and Songkhla provinces, and the excessive demand for these port services forces most of the rubber grown in upper southern areas to be transported to Laem Chabang by truck.

In addition, the greater volume of imports than exports at Songkhla causes an imbalance in container flows and therefore a shortage of vacant containers. This translates into a high cost of vacant containers charged at US$450 (Bt15,570) per TEU at Songkhla, compared to $220 per TEU at Penang in Malaysia.

Train services are inadequate because of the lack of locomotives and goods carriages. Only 59 of the total 212 locomotives are available for transporting goods. The single-track network also delays the train services, she said.

"However, Thailand still has a chance to develop its competitiveness in logistics systems to trade with China, despite having higher logistics costs than Indonesia currently," Thananya said.

Sasithorn Ongdee

The Nation