Exchange floor for Vietnam rubber products can overcome traditional business limitations: industry insider

Trading Vietnamese rubber products on the Mercantile Exchange of Vietnam (MXV) will solve the limitations of the traditional business method with a centralized, open, and transparent trading market, said Le Thanh Hung, general director of Vietnam Rubber Group.

Hung was speaking at a conference to introduce and collect opinions on the rubber exchange in Ho Chi Minh City on Friday. The event was held by MXV and Vietnam Rubber Group, listed on the Ho Chi Minh Stock Exchange as VRG.

He said MXV was cooperating closely with VRG to effectively implement the listing and trading of specific products including rubber. Rubber products will be listed for trading based on MXV's modern information technology infrastructure, while VRG will play an important role of consulting, testing and standardizing product quality.

Duong Duc Quang, deputy general director, introduced the general content of a rubber exchange, the trading system and operating procedures. He said the exchange will operate according to price quotes and trading methods agreed upon, whether they are spot contracts or futures contracts. Rubber products will be coded according to types and manufacturing enterprises, he said

“The difference between rubber trading on an exchange floor compared to traditional business methods lies in the organizational model, operation and application of advanced technology infrastructure in trading. These are experiences that MXV has drawn from the largest rubber markets in the world," Quang said.

It is expected that in the third quarter of 2024, MXV and VRG will coordinate to complete the processes and regulations for the trading of Vietnamese rubber products, and, at the same time, carry out trial operations for listing and trading. The item will officially be listed and traded in Q4/2024.

Vietnam is currently the third-largest rubber exporting country in the world. According to the General Department of Vietnam Customs, the country exported more than 84,000 tons of rubber in May for more than $134 million, up 14.8% in volume and 14.5% in value year-on-year. In the first five months of this year, Vietnam exported rubber worth around $860 million, up 6% over the same period in 2023.

Despite such a large market position and scale, Vietnam is yet to exert corresponding influence on world rubber prices. Its rubber market still has many limitations because it has not been proactive in listing rubber prices on the centralized market, the conference heard.

Conference delegates also noted that products were not consistent in quality, specifications and standards. They said the market was dominated by traditional, simple business methods with traders dominating and controlling prices, which meant farmers were often at a disadvantage. The lack of transparency in market information added to the difficulties facing Vietnam's rubber industry, they said.