Market News

Rubber-growing Nations Cut Exports To Prop Up Prices

Thailand, Indonesia and Malaysia, the world’s top three natural rubber producers, have agreed to reduce exports by 48,000 tonnes per month in the second quarter of the year to prop up falling prices of the product.

Yium Tavarolit, chief secretary of the International Rubber Consortium (IRCo), said the proposal needed ratification by the International Tripartite Rubber Corporation (ITRC) which was scheduled to meet here on May 14 and 15.

Last December, IRCo agreed to cut 915,000 tonnes of rubber from the market in 2009, some 270,000 tonnes of it in the first quarter.

Yium said the 144,000 tonnes to be cut in the second quarter could be increased or reduced depending on the market movement.

“We will monitor the market on a weekly and monthly basis. If the prices go up, we might reduce the quantum, but if they drop, we might increase it,” he said, adding that the agreement to cut 48,000 tonnes per month was made by the Bangkok-based IRCo during its board of directors and shareholders meetings here Friday.

Yium said the current price for technically specified rubber 20 (TSR20) was US$1,500, which was much lower than that for the same period in 2008. China, the world’s biggest rubber buyer, imported a total of 376,386 tonnes in the three first three months of 2009, down 23 per cent year-on-year.

The benchmark ribbed smoked sheets RSS3 currently is around US$1.70 per kg, compared to a high of US$3.25 per kg last July, the highest in 56 years.

The IRCo consists of the three countries — Indonesia, Malaysia and Thailand — which produce 70 per cent of the global production of rubber and which exported 5.9 million tonnes in 2008.

Yium said IRCo was confident that the new measures to reduce exports would push up the rubber prices, or at least bring them to an acceptable figure to both smallholders and other industry players.

The lower prices were due to a lack of demand, he said and cited the current global economic crisis, low oil prices and reduction in car production in Thailand as the reasons for the drop.

In October 2008, the three nations agreed to implement several measures under the Supply Management Scheme (SMS) to counter the prevalent fall in natural rubber prices.

The measures included acceleration of replanting, with the total annual area to be replanted in the three countries in 2009 having increased from 112,000 hectares to 169,000 hectares, which would reduce natural rubber production by around 215,000 tonnes.



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