The International Rubber Consortium, which represents the Southeast Asian countries that produce two thirds of the world's natural rubber, will work with the China Rubber Industry Association to counter rubber price volatility, the head of IRCo said Wednesday.
Bellwether Tokyo rubber futures hit a record high early last month, but have since fallen to multi-month lows due to tensions in the Middle East and the earthquake and tsunami that struck Japan last week.
The two organizations decided on the collaboration during an industry conference in China Tuesday, IRCo acting Chief Executive Yium Tavarolit said by phone.
"The CRIA made the request to work together so as to reduce price volatility. We will be coming up with a joint work plan in the future. They said they were suffering due to record high rubber prices earlier," he said.
The associations will set up a working group this year to determine what actions can be taken to combat price volatility, he said.
China is the world's largest natural rubber consumer and importer. IRCo is comprised of Thailand, Indonesia and Malaysia, which together account for 70% of global natural rubber output.
The collaboration between IRCo and the CRIA comes after Yium said Tuesday that IRCo will likely convene a meeting this week to discuss measures to support rubber prices.
Rubber futures on the Tokyo Commodity Exchange rose to a record high of Y535.7 a kilogram on Feb. 18, but have since fallen sharply, reaching a four-month low of Y335/kg Tuesday. The benchmark August contract was trading at Y363.5/kg at 0607 GMT Wednesday.
The contract fell more than 10% in the first two days of this week due to worries over demand, but rebounded in Tuesday's night session, which is considered part of the next day's trading.
IRCo Monitoring Market
Yium said that IRCo member countries are monitoring rubber prices and will convene an urgent meeting if prices resume their sharp declines.
"We will be monitoring prices closely," he said.
He said that the recent falls in prices have been driven by bearish sentiment due to the Middle East and Japan, but that fundamentals for rubber are currently firm.
Seasonal factors will reduce production in the first half of the year, while major consumers like China, India and the U.S. reported positive auto sales figures in February, he said.
Yium said that although measures can be taken to support rubber prices when they fall below what fundamentals suggest, that there is little producers can do when prices climb sharply as they did in an extended rally between December and February, as the upward move was driven by speculation on the futures market.
(Source: http://www.irco.biz/BlogMoreDetial.php?id=2734&ShowContent=news)
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