Thailand, Indonesia May Curb Rubber Exports to Stem Drop

Thailand, Indonesia and Malaysia, the world‟s biggest rubber growers, will probably
delay exports to counter a price slump as demand outpaces supply during the low
production period, according to a producers‟ group.
“If the price continues to fall, we will definitely do it,” Yium Tavarolit, the acting chief
executive officer of the International Rubber Consortium Ltd., said in a phone
interview today (Mar 17). “Representatives of the three countries agreed in principle
to temporarily delay the exports.”
Rubber has plunged 26 percent from a record 535.7 yen reached Feb. 18 as
worsening Middle East tensions and slowing car sales in China, the largest buyer,
raised concern demand may decline. The decline worsened after Japan‟s strongest
earthquake and on the risk of radiation from a damaged nuclear power plant.
Thailand, Indonesia and Malaysia will have to decide on a minimum price, Yium said.
The nations cut exports to combat a 56 percent price slump amid the global financial
crisis in 2009. “If the price stabilizes and moves in line with demand and
supply fundamentals, exporters will export as normal,” Yium said. The group
represents growers and exporters in the three nations and represents about 70
percent of global supply.
August-delivery futures climbed as much as 8.1 percent, the most since Jan. 5,
2009, to settle at 396.9 yen a kilogram ($5,043 a metric ton) on the Tokyo
Commodity Exchange today (Mar 17). The contract has rallied about 18 percent from
a four-month low of 335 yen on March 15 after Thailand‟s Deputy Prime Minister
Suthep Thaugsuban asked exporters to suspend shipments.
„No Panic Selling‟
The Indonesia Rubber Association today (Mar 17) said it has proposedthat a price of
$4 per kilogram should be defended and urged its members not to sell in a “panic.”
There is still a shortage because of wintering now in growing regions and potential
demand
from consumers and tire manufacturers is strong because of the U.S. economic
recovery and growth in China, it said.
Farmers in Thailand, Indonesia and Malaysia reduce tapping during so-called
wintering from February to May, when trees shed leaves and latex production drops.
Thai output declines as much as 60 percent compared with peak levels, according to
the Association of Natural Rubber Producing Countries.
Malaysia wants to see stable rubber prices, Deputy Plantation Industries &
Commodities Minister Hamzah Zainuddin said March 4. “Prices of rubber should be
around 12 ringgit to 15 ringgit and it‟s enough for everyone to make money.”
„Price Volatility‟
The three countries will work together with China Rubber Industry Association on
measures and a market mechanism to “reduce price volatility,” Yium said after a
meeting with representatives of growers and Chinese buyers. Setting up a regional
rubber market for forward trading is an option, he said.
“What happened to Japan doesn‟t change demand and supply fundamentals, but
affects sentiment prompting investors to seek safe-haven assets,” Yium said.
Japan‟s earthquake on record and a seven-meter high tsunami last week caused
power shortages, forcing car and tires makers to halt production and threatening the
economic recovery.
Natural rubber output may grow by 6.2 percent this year and by 6.5 percent next
year, while demand is estimated to gain by 4.6 percent this year and by 3.8 percent
next year, the International Rubber Study Group said March 11, without providing a
tonnage forecast.
(Bloomberg, March 17, 2011)