Thai Giant Rubber Maker’s Capacity in Indonesia Will be Raised by 60,000 Tons

1 min readUpdated May 16, 2017May 16, 20171:33 AM

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Sri Trang Agro-Industry, the world’s largest producer of natural rubber, plans to increase annual capacity by 20% to 2.9 million tons by year-end to take advantage of a market recovery.

The company accounts for about 30% of output in its home market of Thailand, the largest rubber-producing country. It aims to expand its global market share from 12% now to 20% in two to five years, said Veerasith Sinchareonkul, an executive director.

Sri Trang will invest 2.5 billion baht to 3 billion baht ($72.1 million to $86.5 million) in new production lines, including new manufacturing facilities for sheet, block and liquid rubber in northeastern Thailand with annual capacity totaling 86,000 tons.

Capacity at Indonesian facilities will be raised by 60,000 tons. The company also intends to step up output of medical gloves made from natural rubber, of which it is among the top five manufacturers worldwide.

Sri Trang operates 35 plants and owns rubber plantations spanning 80 million sq. meters. Consolidated sales grew 26% on the year to 77.2 billion baht for the fiscal year ended Dec. 31. The company booked a net loss of more than 700 million baht, down from a 1.1 billion baht profit in fiscal 2015.

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What this means

Sri Trang's substantial capacity increase, including 60,000 tons in Indonesia, is an aggressive play to regain market share and capitalise on a perceived market recovery. This expansion, particularly in Indonesia, uses local resources and positions them for greater regional dominance. The strategy appears sound, given their world-leading position and 26% sales growth, though a recent 700 million baht net loss highlights execution risks. Unlike other retail expansions into new store formats or geographies seen with Miniso or Tiffany, Sri Trang is committing further to core production amidst a competitive commodity landscape. The increased supply could pressure smaller regional players relying on price sensitivity. The critical factor to watch is the 20% global market share target: will the current 12% rise as planned within five years?

Sarah Chen · Retail News Asia newsroom

Questions & Answers

What is the primary reason for Sri Trang Agro-Industry's planned capacity increase?

The company plans to increase its annual capacity by 20% to 2.9 million tons by year-end. This expansion is intended to capitalise on a current recovery in the natural rubber market.

Where will Sri Trang invest in new production facilities for rubber?

Sri Trang will invest 2.5 billion to 3 billion baht in new production lines in northeastern Thailand. These facilities will produce sheet, block, and liquid rubber, with an annual capacity of 86,000 tons.

What was Sri Trang Agro-Industry's financial performance like for the most recent fiscal year?

Consolidated sales for the fiscal year ended December 31 grew by 26% year-on-year, reaching 77.2 billion baht. However, the company recorded a net loss of more than 700 million baht for the period.

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