Long term, GMG Global is looking at the vast continent of Africa to address shortage in supply of arable land in today's agro-economy. Africa covers more than 20% of the world land area.
For fund managers, other than vast natural resources, Africa's beauty lies in its infancy stage of economic development.
GMG has a market cap in excess of $400 m.
Natural rubber (NR) prices were about US$1,000 a ton 3-4 years ago. Now prices have broken past US$3,000.
For fund managers, other than vast natural resources, Africa's beauty lies in its infancy stage of economic development.
GMG has a market cap in excess of $400 m.
Natural rubber (NR) prices were about US$1,000 a ton 3-4 years ago. Now prices have broken past US$3,000.
A plantation has different stages: not all trees are mature for tapping. Some are getting old and need to be felled while others are still growing. During the first 7 years, the rubber trees are still growing and not yet mature for tapping.
In Africa where GMG operate, costs are denominated in Euro. Rubber is sold in USD and Euro. Thus, appreciation of the Euro inflates their costs. Nevertheless, rubber plantations in Africa are much more lucrative than in Indonesia or Thailand. In the Ivory Coast for example, there is a well-regulated price mechanism set by its government for smallholders and processors to reap the upside of increase in rubber prices.
Demand for synthetic rubber (SR) is 12 m tons a year, compared to 10 m tons of NR. That 55:45 ratio has been stable over the years.
68% of NR goes into automobile tyres. Each group has its unique end users with the exception of car tyre makers. Saloon car tyres are made of both SR and NR.
Yields in Africa are more than 50% higher than in Indonesia. In Indonesia, each hectare yields an average of 1.3 tons of rubber a year.
Smallholders are relatively inefficient; each hectare yields 0.6 tons a year to a maximum of one ton. This is because they do not have prime seedlings, lack fertilizers and may employ an inefficient tapping system. Further, they spend minimal effort in maintaining immature plantations.
In assessing tree yield, other than making sure formulae are comparable, one should adjust for worker productivity and occurrence of brown trees (for which latex supply have dried up).
Source: NextInsight
In Africa where GMG operate, costs are denominated in Euro. Rubber is sold in USD and Euro. Thus, appreciation of the Euro inflates their costs. Nevertheless, rubber plantations in Africa are much more lucrative than in Indonesia or Thailand. In the Ivory Coast for example, there is a well-regulated price mechanism set by its government for smallholders and processors to reap the upside of increase in rubber prices.
Demand for synthetic rubber (SR) is 12 m tons a year, compared to 10 m tons of NR. That 55:45 ratio has been stable over the years.
68% of NR goes into automobile tyres. Each group has its unique end users with the exception of car tyre makers. Saloon car tyres are made of both SR and NR.
Yields in Africa are more than 50% higher than in Indonesia. In Indonesia, each hectare yields an average of 1.3 tons of rubber a year.
Smallholders are relatively inefficient; each hectare yields 0.6 tons a year to a maximum of one ton. This is because they do not have prime seedlings, lack fertilizers and may employ an inefficient tapping system. Further, they spend minimal effort in maintaining immature plantations.
In assessing tree yield, other than making sure formulae are comparable, one should adjust for worker productivity and occurrence of brown trees (for which latex supply have dried up).
Source: NextInsight
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