- 4 hours ago
Natural rubber prices are on the uptick amid the West Asia armed conflict raising global prices and demand, and Malaysia’s rubber sector—where labour intensive smallholders account for nearly 88% of production—is facing a pivotal test.
Can stronger prices, sustainability compliance under EUDR, and a reset in the downstream glove industry translate into long-term competitiveness?
Tehmina Kaoosji speaks with Dato’ Dr. Zairossani Mohd Nor, Director General of the Malaysian Rubber Board, (LGM) on the opportunities and fault lines shaping the sector’s 2026 outlook—including why Malaysia still holds over 60% of the global rubber glove market despite mounting pressures.
Can stronger prices, sustainability compliance under EUDR, and a reset in the downstream glove industry translate into long-term competitiveness?
Tehmina Kaoosji speaks with Dato’ Dr. Zairossani Mohd Nor, Director General of the Malaysian Rubber Board, (LGM) on the opportunities and fault lines shaping the sector’s 2026 outlook—including why Malaysia still holds over 60% of the global rubber glove market despite mounting pressures.
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NewsTranscript
00:10Hello and welcome to Nyaga Spotlight with me Tamina Kaosji. Nyaga Spotlight goes through
00:14the week in economic analysis and future affairs. Well today on analysis we're looking at a very
00:20interesting topic indeed and that is a spotlight on rubber industry prospects. Now global demand
00:26for natural rubber is strengthening in 2026 supported by recovery in automotive production
00:32and also steady industrial use. So for Malaysia this should be an opportunity but the reality is
00:39a little more complex. Output does remain volatile together with rubber smallholders who make up
00:44close to 90% of our sector domestically contending with climate disruptions, aging trees and also
00:51productivity constraints. Together also with compliance for the EUDR, the EU deforestation
00:59regulation. So at the same time the downstream segment in Malaysia is also under strain. The
01:05planned closure of WRP Asia-Pacific also reflects a post-pandemic reset marked by global oversupply,
01:13price compression and rising costs. So can Malaysia realign its rubber value chain from smallholder
01:19farms to high value exports and stay competitive in a tightening global market. Joining me online
01:25today is Datto Dr. Zairosani Mohamedno, Director General of the Malaysian Rubber Board, LGM, for this
01:32very timely discussion. A very good morning to you Datto. Thank you so much for making time to join us.
01:37Good morning. Thank you for having me.
01:41Datto, if you could get started off by looking a little deeper at the EUDR, the EU deforestation
01:47regulation. Now Malaysia's smallholders do account for almost 90% of production but many of them are
01:54operating without any kind of formal traceability systems. We'd love for you to share a little bit
02:01more about of course LGM's work on the ground which has been trying to harmonize all of this lately.
02:12Thank you. The aspect of sustainability is very important for our industry. This is our key
02:18strategic area to ensure the sustainability of our industry. So that's why since 2015 we have
02:25already started initiative to make sure that we are able to highlight the sustainability aspect of our
02:32industry. So from the last few years we have been developing systems to allow the entire rubber supply chain
02:43in Malaysia can be highlighted in terms of traceability and also sustainability compliance.
02:50So in Malaysia, as you highlighted, one of our key challenges is our upstream sector.
02:55is the dominated by smallholders. More than 95% of the area is owned by smallholders. So smallholders,
03:03the unique challenges for us is that whatever we do has to be full-proof and then with minimal cost
03:12to
03:12the smallholders. So currently as we are aware that most of the traceability or sustainability is done through
03:20through what we call the certification system through what we call independent and also voluntary
03:26certification system. But in our case because of the smallholders and then the price sensitivity of
03:34smallholders and cost of production, we have to come up with what we call a national framework system
03:39that will allow the smallholders as a group or as nation to be able to comply with all the
03:46requirements for sustainability and also traceability. So that's why we developed what we call the
03:53Emulation Sustainable Nature Rubber. It is a regulatory framework as opposed to what we call compliance
04:00based on certification. So with the regulatory, we use the existing regulation under our licensing regulation
04:08to ensure that all smallholders, including all the stakeholders in the rubber supply chain,
04:14we will be able to comply. So we impose certain requirements under our licensing so that
04:20will allow smallholders to comply without going through what we call the normal certification.
04:25This will allow most of the cost implications for sustainability, especially the traceability
04:31to be absorbed under the regulatory framework. So smallholders only have to make sure that they have to comply
04:37with the key requirements. For example, to ensure that the farm or the rubber smoldings are
04:43what we call not from deforested area and then under legal operations as well as the traceability from farm
04:51up to the factory. So with this system, we launched in 2025. So we have engagement with European
05:05importers. So, so far, we are okay in terms of making sure that our industry is in compliance with the
05:13EU
05:14requirement. That's very encouraging to hear, especially considering that most smallholders,
05:18they own under five acres of land or so. So it would actually be extremely pricey. So this is a
05:25much more
05:26cost-effective way to actually go about it. Thank you, Dato. Now, moving along into looking at the big
05:32climate question. So climate, of course, has become more urgent as a consideration. It's also
05:38affecting rubber yields. So what kind of specific adaptation strategies is LGM actually helping to
05:47support our rubber smallholders via what's been working? And what is the feedback insofar, especially
05:54considering that every time we get excessive rainfall, while that, of course, is wonderful for
06:01growth cycles in general, that also means you can't tap as much rubber during those periods, right?
06:08Yeah. All right. So climate change is, of course, as equivalent to sustainability is a major concern for us,
06:14and we cannot avoid this aspect. So in whatever we do from the research, policy development, we have
06:24to incorporate the climate change, the impact of climate change. So in our case, because our core
06:29activities are R&D, we look at the long-term solution to this climate change. Of course, climate change, we
06:36cannot
06:37solve entirely. What we can do is just to minimize, yeah? So in our case, the climate change is not
06:43only affecting the
06:43upstream sector, but the entire sector of our industry from the upstream, midstream, until downstream.
06:49But critically now is the upstream sector. Because whatever we do, we have to make sure that the
06:55production is maintained, yeah? So in our case, for the small, our key areas, because the climate change is
07:04affecting productivity. So we have to come up with ways and also technology to make sure that we can maintain,
07:11or if not, or better, to improve our productivity. So this can be done through improvement in terms of tapping
07:18system. Also, we have what we call the new ergonomic practices to make sure that whatever impact of climate change
07:28can be mitigated, yeah? Through nutrient supply. And then, of course, what the long-term is to come up with
07:38a new clone, yeah? A new breed of rubber that can withstand changes in climate change, especially
07:45in terms of drought and also temperature tolerance, right? So in terms of climate change, not only
07:55the productivity, we noticed that with the climate change, it also affected the soil. And recently,
08:01in the last few years, we see that the emerging of new plant diseases, diseases that were not serious
08:09last time, not became very, very serious. So that's why we have to look into climate resilient clones,
08:16rubber clones, as well as disease resistant clones. So that will be our long-term solution for this.
08:23And Tato, now from there, moving into yet another concern, which is looking at replanting rates.
08:31Now, aging trees also, of course, are not optimal for tapping rubber, and low productivity is still
08:38slowing down output. How is LGM also addressing the economic disincentive for our smallholders?
08:45Because, of course, there's a period of roughly about seven, eight years before newly planted rubber
08:51trees can actually be tapped. But at the same time, they're struggling with too many trees that have
08:56gone over the limit for when they can be tapped. How do we move from here?
09:03In terms of rubber replanting, actually MRB is working together with various government agencies,
09:11especially RISTA, VELDA, and also VECRA. Those are the implementing agencies responsible for
09:18doing or implementing the replanting based on our new policies and also strategy. So this is what
09:27we are looking at how to make sure that we have regular replanting because we have to make sure that
09:33the
09:33age profile of our trees are optimum for optimum production of productivity. So we
09:40realized that now we are facing a lot of issues with the replanting because of the structure of small
09:47holders now. Because last time, the average small holding is about maybe in the 80s about four hectares,
09:55but now it's down to about 1.7. So the size is too small. So implementing replanting on individual
10:02basis as what we have done in the past 20 or 40 years will be very difficult. So what we
10:08have to do
10:09now, we have to look at the new approach of doing replanting and then to make sure that replanting
10:14costs can be controlled. Now as increasing in replanting costs, we have to make sure that the replanting
10:22can be done with a limited budget that we have, right? So what we are trying to do now is
10:26to
10:27introduce new approaches in terms of replanting rather than going for individual, we go for group
10:33replanting and then we optimize in terms of the location of replanting, yeah, so that
10:41we can reduce, yeah, the what we call the immaturity period, yeah, from five to seven to less than five
10:48years. And then combined with the group replanting or what we call cluster replanting, yeah, we can
10:55ensure that small holders, when they wait for the rubber to be mature, yeah, when they do it in a
11:00group,
11:00they can minimize costs, all right? And then this is what we are trying to implement is to get the
11:08small
11:09holders or group of small holders to implement what we call the integrated farming. So before the trees
11:16are matured, so they can replant between rows into crops, for example, banana, pineapple,
11:24chiles so that they can supplement their income. And it has to be done in a large scale so that
11:30they
11:31can have the what we call the economy of scale. So for example, they can work in a group under
11:35cluster to do
11:37what we call the what we call the contract farming. So for example, producing banana or other cash crops. So
11:42this would be able to supplement. This cannot be done individually but can be done as a group cluster.
11:48So we are looking into a more clustered basis, yeah. And then through this, we can also what we call
11:55develop what we call entrepreneurs. We want small holders to be not just rubber tappers but they have to
12:00be entrepreneurs. And we encourage, yeah, working with relevant cooperatives, rubber cooperatives to do
12:07this. So it's more like we are trying to change the structural framework of small holding, yeah.
12:15And that's actually extremely critical, particularly considering the current
12:19cost of living related prices that are definitely going to escalate in the next month or so. So perhaps
12:26this is the real solution for medium to long term food security, which is also buffered by the rubber
12:33industry sector. Thank you, Dato. Now, if we could spend a little bit of time, Dato, on looking at the
12:39fact
12:39that Malaysia is also increasingly a net importer of the rubber, the natural rubber that we use in our
12:47downstream sector of rubber products. So some thoughts on this as well. So does this also then create
12:56structural vulnerability because you also need required to ensure that all the rubber which is
13:01being imported for downstream users does have a compliance with the new EUDR regulations?
13:09Specifically, if you look at the downstream sector, especially for the latex-based, latex-based,
13:15particularly the glove sector, they are depending 90% of the raw material being imported from our
13:23neighboring countries. So this is actually a risky aspect on our part because if we are not able to
13:32supplement, yeah, the raw material will introduce new strategic or long-term issues in our sustainability
13:41and also its competitiveness. All right. So for example, in glove sector annual consumption is about 400,000
13:49tons. But we, local production is only less than that, 40,000 tons. If you look at the overall
13:57production, yeah, Malaysia produce about close to 400,000 tons. So that means we technically can supply
14:04all the raw material of our downstream sector. It's just that our smallholders are not producing latex.
14:09They are producing what called the solid rubber, the Kaplan. So but if you can encourage smallholders to
14:14gradually or increasing latex production, we can supplement. So that is our
14:19strategy. We want to increase our latex production so that our local can increase the supply for
14:28downstream sector. So now, for example, our aim is to increase up to 50% of our consumption based on
14:36our local. So when we use local because we can ensure that with MSNR or Malaysian Sustainable
14:44Renature rubber system, we can ensure the sustainability or traceability. So our challenge
14:49still, if we use imported raw material, we have to work with the source country to make sure. But at
14:55this point, it's very difficult. So that's why we have to strategically segregate our raw material. If the
15:02market is for EUDR, we have to use mostly our local so that we can ensure the compliance and also
15:08traceability.
15:09So that is our strategic approach to encourage more smallholders to produce more latex. But this comes
15:15with a specific challenges because when smallholders are required to produce latex, they are actually
15:23spending more time. So whether these activities producing latex compared to what we call the solid rubber,
15:29cutplum is worth. So this is where we are looking at incentive to encourage smallholders and to enable
15:37technologies to facilitate latex production. And also, we are trying to make sure that the factories,
15:44the manufacturers are linked to smallholders. So that we wanted to be a part of the initiative to
15:52produce latex. So now, what we are trying to do through our regulatory adjustments, we will allow
15:59for example, factory to deal directly with smallholders to buy the raw material. So this will have,
16:05will create more interaction with the smallholders and also manufacturers, so that manufacturers
16:11can contribute in terms of development and also supporting the smallholders.
16:17So clearly, with a deficit of oil close to 350,000 tons, there's plenty of opportunity for the smallholders.
16:23Dato, thank you very much for the insights so far. We take a quick break. We'll be back right after
16:27with
16:28the rest of the show.
16:51Welcome back to Niagara Spotlight. And today, we're discussing rubber industry prospects with Dato Dr.
16:57DG, who is from Lumbaga Gata Malaysia, the Malaysian rubber board.
17:01Dato, going into looking at the downstream glove sector, which is also under pressure, despite
17:07stronger upstream prices. So currently, there is a little bit of overcapacity. There's also price
17:14compression and also currency strength, which is affecting margins, illustrated by the recent closing and
17:21winding down of operations of WRP Asia-Pacific. In your opinion, how should Malaysia rethink the balance
17:30between upstream production and downstream manufacturing to avoid these disconnects as much
17:37as possible now that we're learning these amharsha lessons?
17:40Dato, that's right. So what happens in the Middle East shows us a very critical aspect of our
17:46downstream sector, the disruption of supply chain. All right. So in our case, what we have to do that,
17:53um, uh, uh, particularly for, um, uh, uh, rubber set, uh, glove, uh, sector, yeah, because, um, the, the,
18:01the, the production now depending more mostly on the, uh, what called the synthetic rubber.
18:05So, uh, uh, uh, if, uh, uh, I'm not mistaken. The current, um, uh, percentage of, uh, synthetic
18:12over natural is about, uh, synthetic is about 60%, 40% is from natural rubber. So what we're trying to
18:19do
18:19now with this is to make sure that, um, the supply is not disruptive, um, uh, in terms of, um,
18:26the, uh, stocks, yeah.
18:28So what we have to do now, uh, to look into, uh, for example, increasing the natural
18:34rubber production and waste to shift the, uh, uh, synthetic into more natural, uh, rubber, uh,
18:42production. So, but meaning that we would like to get more, uh, uh, natural rubber glove being
18:47produced, but we know there's a limit to that, right? So with that, what we're trying to do is to
18:51align the rubber supply chain, yeah, um, to make sure that the, um, uh, supply rubber or in terms of
18:59natural
19:00rubber from our local is enhanced to make sure that we have minimum, uh, volume, uh, for our
19:06industry requirement. And then also for the synthetic, yeah, we have to look at ways to reduce the cost
19:13of, uh, production, right? Uh, now it's not only the, um, uh, the, uh, petrochemical feedstock,
19:20the synthetic rubber, but we have to look at the, um, the other cost factors, uh, especially the energy.
19:26The, uh, in glove sector, we are using a lot of natural gas, yeah, uh, for production. So we have
19:32to
19:32look into ways to ensure this. So the industry is self-adjusting to this. And we know that industry
19:38based on the commercial, uh, experience and strategy, they know how to do the sourcing.
19:44But what we have to do that, uh, in, um, in the country, we have to make sure that the
19:49policy
19:50to support, uh, is, um, uh, improve, yeah, um, to ensure that they can, uh, uh, shift, uh, shift from,
20:00uh,
20:01synthetic to natural rubber. And also, um, for example, in, uh, local manufacturing,
20:06there are also manufacturers in Malaysia producing synthetic rubber. So we have to work with the local
20:12synthetic rubber producers to give, uh, more, uh, emphasis on local consumption. Yeah. So reducing,
20:18uh, export and give more priorities to local. Yeah.
20:22So that will be shorter. Yeah.
20:24Exactly. And Malaysia currently still holds over 60% of the world's, uh, global glove market share.
20:31So these, uh, preliminary measures are of course very essential in order to ensure that we can keep
20:37up that supply. Uh, that's all, uh, moving into another sector and area, which is that labor shortages
20:43are also a persistent bottleneck. Now, rubber tapping is certainly very labor intensive and the
20:49workforce domestically is also, um, aging year on year. Uh, where is, um, LGM seeing, um, traction when
20:59it comes to automating the rubber industry, particularly when it comes to the more intensively labor parts
21:06of it. And what do you feel are some of the cost barriers, which can perhaps be overcome if they
21:15are scaled, um, across the rubber industry, especially the downstream sector? Yeah. Um, our critical issues,
21:23uh, in the, uh, upstream sectors now because of the smallholders, um, um, um, requirements, yeah,
21:28and also the, um, cost, um, sensitivity, uh, for the other sectors, the downstream, uh, sectors,
21:35and also the processing, um, it's not so critical because they can adjust in terms of, uh, the, uh,
21:41capacity to do automation. Our focus now is to make sure that the options that, especially the
21:46smallholders, yeah, will have, um, sufficient, um, or called automation. But, uh, this has been done
21:53over the last, uh, 10, 20 years. But the problem now with the smallholders is that the, the, um,
21:59up from cost, yeah. For example, we came up with a mechanical tapping system,
22:03or fully automated tapping system in the past. But implementation, um, for the, uh, smallholders,
22:10uh, very challenging. So what we are trying to do now is to make sure that we can further, uh,
22:15improve the, uh, uh, automation. So we are looking at now specifically to reduce, uh, the cost of tapping
22:22and also, um, improving the tapping through mechanical tapping system. Yeah. So that means you have a mechanical
22:28tapping knife to improve what we call the, um, uh, productivity of smallholders. Yeah. But at
22:34the same time, we are also coming out with a new tapping system. Yeah. So for example, now we are
22:38introducing, uh, enhancing what we call the low intensity, low intensity tapping system. Um, because
22:45as you know, rubber tree has to be tapped every, uh, three days. Now with the low intensity,
22:50we can reduce that to, for example, every six days, but still maintaining the productivity.
22:56Right. So this is, um, um, a combination that we have, uh, improving, uh, the, um, automation through
23:04mechanical tapping and improving the tapping system to reduce the level. All right. And then at the same
23:10time, we're trying to make sure that the, um, work done, um, as I indicated earlier, we have to make
23:17sure that smallholders work in groups. Yeah. So when they work in groups, uh, the technology transfer is a lot
23:24easier, more manageable, right? And then for example, the tapping and the automation has to be done in a
23:31group, cannot be done at an individual basis. So this is what we are trying to do, uh, short term
23:37basis
23:37here to make sure that we can address the shortest of level. Exactly. Thank you, Dato. And as we move
23:44to
23:44close out, um, the entire segment, um, let's look at the outlook, uh, forward looking 2026 to 2030,
23:52and also looking at LGM strategic plans for 2026 to 2030. So what are the two or three structural shifts
24:00which, um, LGM is looking forward to implementing during this time?
24:06So through the, um, uh, strategic, uh, plan that we have for 2026, 2030, this is aligned with the, um,
24:14the 13, uh, Malaysian plan, right? Uh, our aim is to make sure that, uh, the sustainability and
24:20competitiveness of our industry is, uh, sustained. So we see that, uh, we have to move beyond, uh, what
24:26call the technical, um, uh, uh, technical and also quality, um, uh, advantages. We have to capitalize
24:36on sustainability as our next, uh, competitiveness. So Malaysia in the position, uh, to capitalize
24:42this because we have all the support, the ecosystem to make sure that we can, um, make sure that our
24:48industry can be, uh, uh, a leader in, um, sustainable rubber production, um, sustainable rubber products.
24:56It's also what we call the Grim Hub. So we want to, uh, develop Malaysia into what we call the
25:01global Grim Hub for rubber production. So that will ensure, yeah. So, uh, the, through the strategic
25:08move, we have three key initiative. Um, first is to make sure that, um, the productivity. So we know
25:14that we cannot compete in terms of land, um, for rubber, uh, compared to our neighboring countries.
25:20But what we can do is to ensure that with the technology, we can increase the productivity.
25:25So with a limited area, uh, we will increase productivity. And then, uh, all our development,
25:31our policy development, ecosystem now is, uh, gearing towards incorporating all the, uh, sustainability
25:37ESG to make sure that we have the, uh, competitive advantage in this area. Yeah. As well as in terms
25:44of,
25:44uh, value addition. Yeah. Uh, we have to make sure that we, uh, the country can produce more
25:50value added products, yeah, to stay competitive. Yeah. Uh, as you know that Malaysia, one of our
25:56key challenges is the fierce competition. Uh, so we have to make sure that, uh, we are competitive,
26:02uh, in certain, uh, rubber products where value addition is highlighted and to make sure that, um, yeah,
26:09um, the advantages that we have, yeah, uh, the ecosystem can be used, yeah, for our, uh, rubber set,
26:17especially not only glove, but, uh, the dry rubber product, uh, the automotive engineering rubber products.
26:24Yeah. So this is where we see our growth area in the future.
26:29Thank you. Thank you very much for the insights. Uh, that was Dr. Zairusani Mohamed Noor, director
26:35general of the Malaysian rubber board. Now, clearly when the industry looks to be at such an inflection
26:41point, if Malaysia is able to lift productivity, they will also be able to meet stricter sustainability
26:46demands as well as better connect our upstream value with our downstream supply chains. I'm Tamina
26:52Kaosji and that's all the time that we have for today's, um, special looking at Labor Day and of
26:58course the rubber industry prospects. Join us next week for more economic analysis and insights.
27:03Here's to a productive week ahead.
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