The rubber industry may need to reestablish an international buffer stock system to help manage prices in times of sharp fluctuations, said Yium Tavarolit, chief secretary of the International Rubber Consortium.
It is important to explore a process that would ensure fair prices for both the producers and consumers--an inventory that could be increased in times of excess natural rubber supply, and released into the market to stabilize prices when they are volatile, he said Tuesday.
"Currently, prices are very high and it's hard for manufacturers to manage costs," the Bangkok-based Yium told Dow Jones Newswires.
Rubber prices have risen to high levels this year due to adverse weather in major producing countries, and a pick-up in demand due to global economic recovery and rising vehicle sales in China and India, the top two rubber consumers.
In Thailand, the world's largest producer and exporter of the commodity, production has been hit by a longer-than-expected dry wintering season in the first half of the year, and an extended wet season in the second half of the year. Flash floods have also hit parts of the country recently, damaging plantations.
Speculation in futures markets, particularly on the Shanghai Futures Exchange, has helped to exaggerate the effects of the supply and demand trends in spot markets.
The management of a rubber stockpile was practised by the now-defunct International Natural Rubber Organisation, which was dissolved in 1999.
Yium acknowledged that while international stock management system could be useful, lessons from Inro should be taken into account.
Inro was dissolved after Thailand and Malaysia pulled out of the organisation, due to what they said was its inability to support the market.
Earlier this year, IRCo also discussed the establishment of a regional cash market for physical rubber.
(irco.biz)
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