Indonesia rubber output to get boost from surging demand

* The rubber output seen up to 8.6 pct Indonesia in 2011
* The domestic rubber consumption seen 10 pct higher this year
* Indonesian government is unlikely to intervene in the prices
* Business as usual for rubber Earthquake in Japan (Adds details, background)
By Michael Taylor
JAKARTA, March 22 (Reuters) - Indonesia, the world's largest producer of rubber second, increase its production by more than 20 percent to 3.6 million tonnes by 2015 to meet rising domestic demand and the Chinese in rapidly growing economies, Indonesian Rubber Association (Gapkindo) said on Tuesday.
Within five years, domestic consumption of rubber in the largest economy in Southeast Asia should go to 20 percent of total production, Suharto Honggokusumo, Gapkindo executive director told Reuters.
Indonesia produced 2.8 million tons of rubber in 2010 and sees this Honggokusumo percent increase between 6 and 8 of this year.
The weather anomaly La Nina caused unusually heavy rains this year in Indonesia, even during the dry season, common, leading to the production of many commodities.
"Before 2007, the (annual percentage) increases about 10 percent," he said. "This is our capacity. The economic situation is improving in 2010.
"We need to improve quality and increase production in 2011," he said.
domestic consumption of rubber in Indonesia was 422 000 tons in 2010, and Honggokusumo is an increase of 10 percent this year, when the economy is projected to grow by 6.4 percent.
"This is normal, as in China, economic growth is very fast," he said. "Everyone wants a better life - from bicycles to motorcycles, then cars."
"We need to increase local consumption," he added. "In 2015 we would have 20 percent of production is consumed locally."
Global demand for natural and synthetic rubber, is expected to increase to 26.1 million tons in 2011 to 24.4 million tonnes in 2010, the International Rubber Study, said earlier this month.
Dealers say that this is due in part to a recovery in the automotive sector. The U.S. auto industry broke a sales decline in four years in 2010, including three consecutive months of sales above the rate of 12 million units annually.
The Tokyo rubber futures, which set the global trend, rose to a maximum of two weeks on Tuesday to close at 433.9 yen ($ 5.35) per kilogram on supply concerns.
"The trend in rubber prices are high," said Honggokusumo. "It is good for buyers and producers," he said, but was unable to give an average price forecast for 2011.
He added that nearly 86 percent of Indonesia's rubber plantations owned by small farmers.
Rubber prices hit record highs in mid-February but have fallen this month increased the doubts about the demand and the global economy in the first reaction to the unrest in the Middle East and then the devastating earthquake last week in Japan .
rising prices have encouraged farmers in producing countries to try to exploit the latex as possible and even expansion of plantations of the plan, although the performance of the new trees would only come in five to six years.
NO ACTION
The Thai government said on Monday however, it would not intervene in the domestic rubber market at this point because prices had recovered to a level of farmers were satisfied with.
Traders had said that the government can intervene directly in the market and buy rubber reserves. The largest exporter of Thailand produces about a third of world natural rubber.
Also this week, a meeting of the world's top three rubber producing countries, Thailand, Indonesia and Malaysia, was postponed as prices surged to adequate levels, a senior Thai official said.
When the global economy faces a recession in late 2008, the top three rubber producers, said it would cut shipments in 2009 to prop up export prices, which had fallen to about $ 1.50 per kg.
Honggokusumo also said that the government of Indonesia was unlikely to intervene to support rubber prices.
In the Japanese earthquake and tsunami, which encouraged a nuclear crisis, said Honggokusumo had not heard of cancellations or postponements of deliveries to Japan.
Japan accounts for 7 percent of world demand for natural rubber.
"It's business as usual", he added. "I do not think there is a significant impact for us."
I just returned from an event in the rubber industry in China, Honggokusumo is the world's largest rubber consumer demand leader for the next years.
"They need more rubber," he said.
(1 USD = 81.045 JPY)