Published January 22, 2009

Rubber producers ready for more output cuts this year

	Email this article
	Print article
	Feedback

(PUTRAJAYA) The world's top three rubber-producing countries are prepared to cut rubber exports by up to 20 per cent this year and revise the commodity's floor price in another bid to support prices.

In the doldrums: Natural rubber prices have plunged more than 52% from July's highs due to the ailing global auto sector and faltering crude oil prices

However, Thailand, Indonesia and Malaysia's willingness to remove another 430,000 tonnes of rubber from world markets may not fully prop up rubber prices that have more than halved from a 56-year high in July, traders said.

Natural rubber's fortunes have worsened due to the ailing global auto sector and faltering crude oil prices, which have dived 78 per cent since hitting a record high of over US$147 a barrel last July, making its synthetic rival more attractive.

The three South-east Asian nations, which make up 70 per cent of global output, would now take out up to 1.345 million tonnes of rubber this year if prices fall drastically, Malaysian Commodities Minister Peter Chin told Reuters in an interview on Tuesday.

Mr Chin's comments come as the International Rubber Consortium (IRCo), which accounts for 70 per cent of world output, faces mounting criticism for not doing enough to shore up prices.

'IRCo is aggressive in getting the fundamentals right, it is not necessary to tell the whole world what it has done behind the scenes,' Mr Chin said in the interview.

'We (IRCo) will monitor the (rubber) price trend closely for the next three quarters. If there is a need to continue with the Agreed Export Tonnage Scheme (AETS), another 430,000 tonnes of exports will be reduced,' he added.

The member countries shipped 5.5 million tonnes in 2007, while total output was seven million tonnes, according to industry data.

They initially planned last year to cut 915,000 tonnes of exports in 2009 and set the floor price at US$1.35 per kg.

Ministers from the three South-east Asian countries will meet here in February and look at revising the floor price, besides discussing plans to assist smallholders and issues of non-fulfilment of contracts, Mr Chin said.

Key Tokyo rubber futures ended Tuesday down a touch, to finish at the key psychological level of 150 yen, recouping losses of close to 5 per cent after Mr Chin's comments.

Thailand, the world's largest rubber producer, said on Tuesday that it will buy at least 200,000 tonnes along with corn and crude palm oil to shore up prices as part of a package to support farmers and help stimulate the economy.

'The government would spend around 13 billion baht (S$559 million) in a bid to support farmers to get higher income and prevent them from making losses if commodity prices fall,' Thai government spokesman Puttipong Punnakan said.

The government did not reveal the price at which it would buy rubber from farmers although there is some trader talk that it would only buy at market levels, hoping that this would indirectly help farmers by pushing market prices higher.

Traders were unimpressed. 'It would be useless if the government bought rubber from farmers at market prices,' one trader said.

Malaysia may consider giving credit to local dealers who would be able to buy rubber stocks if prices fall below US$1.12 per kg but Mr Chin declined to say how much the government would allocate.

With more than 70 per cent of rubber going to the auto tyre industry, top producers are feeling the pinch as car sales skid and consumers turn cautious as the global recession spreads.

Cash rubber prices have plummeted more than 52 per cent from a 56-year peak of US$3.25 a kg in July, with benchmark Thai rubber around US$1.55 per kg on Tuesday. -- Reuters