Asian rubber producers mull setting up regional cash market

* Consortium represents 70 percent of global rubber output

* Futures seen distorting market fundamentals

By Apornrath Phoonphongphiphat

BANGKOK, May 25 (Reuters) - Thailand, Indonesia and Malaysia, the world's top three rubber producers, want to set up a cash market for the commodity that would make pricing more transparent and stabile, industry officials said on Tuesday. A regional rubber market might also reduce the influence on physical prices of futures markets such as the Tokyo Commodity Exchange (TOCOM), said Abdul Rasip Latiff, chief executive officer of the IRCo.

The IRCo, or International Rubber Consortium, groups rubber industry officials, exporters and government officials from the three countries that account for 70 percent of world rubber output.

"The concept has been agreed upon and a special committee of experts has been established to study the feasibility of this concept in greater detail," Latiff said in an IRCo statement.

Cash prices are relatively high at the moment, with the benchmark Thai RSS3 offered at $3.80 per kg on Tuesday,

Prices have been extremely volatile in recent years, hitting a record high of $4.10 per kg in April as the dry season cut latex output at a time of strong demand.

Traders, producers and end-users, mostly tyre makers, have blamed the volatility to some extent on the speculative nature of trading on TOCOM, which has overshadowed the fundamentals in the physical market.

The cash market would be located in one of the three countries and would include warehouses and a clearing house, where buyers and sellers would commit to physical deals with specified shipment dates, said a senior official at the IRCo, who asked not to be named.

Although there are local markets in several key rubber areas in the three countries, such as Hat Yai in Thailand, the IRCo believes a regional market would help increase the influence of fundamental factors.

"The regional rubber market will help reflect real supply and demand on the fundamental side as well as discover appropriate price levels," another IRCo official said.

Most traders welcomed the idea of setting up a cash rubber market in the region, agreeing it would help stabilise prices and give buyers and sellers a centre for exchanging rubber, but they had reservations.

In particular, they felt big players might be able to influence prices more easily if there was one market.

"The concept is good, but the question is, how can they assure us there'll be no collusion? Otherwise they would fail to stabilise prices," a Malaysian trader said.

(in.reuters.com)