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Helixtap Margin Report 2023 1H


    2022 started with the talks of Supercycle. However, the year turned out quiet, expected amid geo-political tensions, China’s Zero Covid policies, rising inflation, and concern around inflation. Thus, the expectation is that the demand and physical prices are likely to remain southbound, at least in the short-midterm period. 

    In a situation like this, producing with a positive margin becomes crucial for survival. With a year in negative, the Indonesian producer was impacted the most, leading to some producers shutting down and some maintaining the bare minimum production to avoid a liquidity crunch. However, interestingly despite being in the negative, they saw some improvement in the margins from US$(-) XX/mt in January 2022 to US$(- ) XX/mt in December. The key factor was imports of low-cost raw materials and favorable forex. 

    Meanwhile, Thai producers, who had a relatively stronger H1, saw a reversal trend and closed the year, being the most expensive in the market. As a result, Thai producers saw an average margin of US$XX in January but closed the year in the negative. In addition, the strength of the Thai Bhat, the US dollar, further complicated the situation. Despite being the highest premium compared to Indonesian, Malaysian, and consumer-grade African rubber, Thai producers were unable to compete and capture international consumer market share due to their high raw material prices. 

    The African rubber, too, saw some impact on the margins, but owing to low-cost raw material despite higher processing charges, they continued to make larger margins. However, the margins did see a drop of around 28% over 2022, part of which was the unfavorable forex market and the sluggish demand from its traditional market Europe and the US. 

    In this report, Helixtap analyzes the profitability and cost of the Indonesian, Thai, and African factories.

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