Indonesia’s shrinking rubber supply lifts prices and reshapes global sourcing

Exports fall as plantations disappear

Indonesia’s contraction as a natural rubber supplier is tightening the international market and changing price relationships among major origins. Natural rubber exports, excluding mixed rubber, totaled 649,000 tonnes in the first half of 2026, down 23% year on year, according to SunSirs data cited by VietnamBiz.

Indonesia’s Ministry of Agriculture estimates that rubber acreage fell 17% in five years, from 3.78 million hectares in 2021 to 3.13 million hectares in 2026. Production declined from more than 3 million tonnes in 2021 to a projected 2 million tonnes this year. Indonesia remains the world’s second-largest natural rubber supplier after Thailand, accounting for about 14% of global output.

The decline is concentrated among smallholders, who produce 91% of Indonesia’s rubber. In South Sumatra, the country’s largest producing region with nearly 30% of national output, as much as 500,000 hectares may have been converted to oil palm, Apkarindo chairman Arif Susanto told Reuters. Palm fruit can be harvested twice monthly, while rubber requires tapping every other day and takes 5–7 years to reach production.

Low yields and palm oil returns accelerate the shift

Indonesia’s average rubber yield fell from 1,095 kg per hectare in 2019 to 951 kg per hectare in 2024. That compares with about 1,800 kg per hectare in Thailand, 1,720 kg in Vietnam and 1,510 kg in Malaysia. Ageing trees beyond their economic life of 25–30 years, shortages of skilled tappers and Pestalotiopsis leaf-fall disease, which has at times cut latex yields by half, have compounded weak returns.

Oil palm offers faster cash flow and has benefited from high fresh fruit bunch prices and biodiesel mandates. Indonesia is the world’s largest palm oil producer, and the sector represents 8.3% of export earnings and 3.5% of GDP. The Ministry of Agriculture has acknowledged that weak rubber prices encouraged conversion and says it is seeking to improve the industry’s competitiveness.

The supply loss has erased Indonesia’s previous price discount. Helixtap Technologies chief executive Farah Miller said Indonesian SIR20 recently traded at parity with, and at times above, Thai STR20. A year earlier, Thai material consistently commanded the higher price. Tire manufacturers, which consume about 50% of Indonesia’s natural rubber, consequently have less scope to replace missing Indonesian volumes with Thai supply.

Futures rise while buyers seek alternatives

VietBao reported broad gains across Asian rubber markets. November rubber on TOCOM rose from 413.30 to 429 yen per kg, while December increased from 412.90 to 421.90 yen per kg. On SHFE, September advanced from 16,490 to 16,905 yuan per tonne and January 2027 from 17,405 to 17,845 yuan per tonne. SGX September TSR20 climbed from 213.60 to 219.90 cents per kg, while October reached 218.60 cents per kg, up 0.37%. Thai September RSS3 added 0.1 baht to 88.1 baht per kg.

Demand from China and a recovery in the automotive industry could support prices in 2026, according to an analysis by Finansia cited by VietBao. However, the Association of Natural Rubber Producing Countries has forecast global natural rubber production to rise about 2.4% to 15.337 million tonnes in 2026, suggesting that Indonesian losses will not necessarily create an immediate worldwide shortage.

West Africa, particularly Côte d’Ivoire, is gaining market share as tire makers diversify supply. Vietnam, the third-largest producer with about 1.28 million tonnes and 9% of global output in 2025, may also gain in markets including Japan, the United States, China, India and South Korea. Both origins face competition and traceability demands as the European Union Deforestation Regulation approaches its December 2026 deadline. Higher natural rubber prices could also encourage downstream users to substitute some synthetic rubber where technically possible.