The EU Zero Deforestation Act (EUDR) is a new piece of 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 relates to 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 legal**, 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 regulations will come into effect on June 30, 2023, and will be mandatory for all businesses to comply with the EUDR on December 30, 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 June 30, 2025 must comply with the EUDR regulations. So will the EUDR Act have an impact on the structure of natural rubber ** in the future?
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, Vietnam, Côte d'Ivoire, China.
According to Longzhong information, the current EUDR bill, 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, Thailand attaches great importance to this matter, and believes that the new EU regulations are an excellent opportunity to enhance Thailand's global competitiveness, and strive to create income for Thai rubber farmers and raise the standard
Côte d'Ivoire sees the EUDR as an opportunity to lobby the EU to increase financial support to reduce deforestation through such a commitment that by the end of 2024 they will be 100% ready to meet all EU legal requirements.
However, Indonesia and Malaysia have cooperated to combat the EUDR, and Indonesia's opposition to the EUDR is stronger, and the opposition is more focused on palm oil, its main export, and the implementation of the EUDR in Indonesia and Malaysia may be further delayed.
Second, the global import volume of EU natural rubber
In 2022, the EU imported 135 rubber annually40,000 tons, Thailand, Malaysia, India and Vietnam + Kote accounted for a total of 882%。From January to October 2023, 870,000 tons will be imported, and India, Malaysia, Thailand and Vietnam + Kote will account for a total of 877%。Among them, the proportion of Indonesia is decreasing year by year, and the proportion of Kote is increasing year by year. Judging from the above data, Thailand, Indonesia and Kote occupy the main strength in the EU market. From the source, in line with the EUDR of raw materials after all, a minority, 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 products will inevitably appear strong, according to Longzhong information Thailand visit research and understanding, the implementation of this regulation, on the basis of meeting the conditions of the rubber price or will rise about 300 US dollars ton, will inevitably stimulate the price of tire factories, when the long-term pricing of overseas tire factories will be affected by the EUDR Act.
3. The impact on China's imported rubber
At the beginning of 2023, the difference between Thai standard rubber and African No. 10 standard rubber is at least 120 US dollars ton. With the rise of emerging rubber producing countries in Africa, the amount of rubber imported by China from Côte d'Ivoire has increased significantly, and the circulation of African rubber in the Chinese market has increased. It is understood that Africa has first completed the EUDR certification, and the African export market may point to the European Union from 2024, and the export volume to China will be reduced at the same time, to a certain extent, the price difference between Thai rubber and African rubber will be narrowed to a small level.
It is expected that starting in the first half of 2024, countries around the world that meet the requirements of the EU market will concentrate on the production of rubber that meets EU standards, which will lead to the overall upward trend of natural rubber. On the contrary, this part of the rubber that does not meet the requirements of the EUDR regulations will likely be diverted to the Chinese market, which will affect the overall pattern of China's natural rubber.
Fourth, the uncertainty of the bill
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, the cross-border ** in Southeast Asia is intricate, 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 European Union is estimated to be 2 million tons, and the estimated annual volume in line with the EUDR production is about 600,000 tons.