The International Rubber Consortium will likely ease or eliminate controls on exports of natural rubber imposed last December to reflect tight supply and increased demand, a senior IRCo executive said.
The consortium, which comprises the world's three largest natural rubber exporters--Thailand, Indonesia and Malaysia--targeted an export reduction of 700,000 metric tons in 2009 after prices fell sharply late last year. The program was put on hold in the current quarter, and a consensus might be reached during a two-day meeting of IRCo members in Langkawi, Malaysia, starting Friday.
"Export cuts were put in place when prices fell sharply and demand was weak," IRCo senior economist Yium Tavarolit told Dow Jones Newswires. "Now there is no reason to continue them...We expect an easing of controls after evaluating the export cuts already made so far, but a final decision has yet to be taken."
Currently, exports are restricted under an Agreed Export Tonnage Scheme. Under the AETS, exporters are allocated quotas based on the volumes they shipped in the previous year, which serves as an indirect control on overproduction. IRCo members don't control supplies through stockpiling by buying from producers, but they have offered incentives to rubber estates that fell old low-yielding trees and replant.
IRCo will analyse data on rubber replanting this year and its impact on production, Yium said. IRCo had set a target of reducing production by 215,000 tons through replanting on top of a commitment to leave 700,000 tons of rubber untapped, resulting in a total supply cut target of 915,000 tons for 2009.
Thursday, RSS3 grade natural rubber futures on the Tokyo Commodity Exchange rose to a new 13-month high of Y244.6 a kilogram.
Yium said market sentiment seems to be bullish, and due to a partial recovery of the global economy, demand has improved while supply is very tight because of heavy rain in Thailand and western Malaysia.
According to data from IRCo, whose member countries account for around 70% of global natural rubber supply, exports fell 10% to 1.195 million tons in Thailand, by 13% to 1.065 million tons in Indonesia and 39% to 309,000 tons in Malaysia during the first half of 2009.
IRCo was planning to meet with delegates from the China Rubber Industries Association on the sidelines of the Langkawi meeting, but Yium said the dialogue has been postponed due to scheduling issues.
Demand in China is on the rise--and IRCo's parent body, the International Tripartite Rubber Council, is eager to coordinate more with the world's largest consumer of natural rubber, he said.
ITRC communicated with Chinese rubber industry officials earlier this year on steps that could be taken to manage supply and demand more effectively, he said.
"The basic objective of such a dialogue with China is to avoid any shortage in future," he noted.
Vietnam, a major natural rubber exporter has agreed "in principle" to join ITRC but has sought additional information before it makes a final decision, he added.
(Source: http://irco.biz)
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