Published June 23, 2009

10% dip seen for M'sian rubber exports

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(KUALA LUMPUR) Malaysian rubber exports may fall 10 per cent this year, nearly doubling from a plan to cut exports along with other producers, as global demand from the car sector remains weak, a top industry official said yesterday.

The car industry accounts for 70 per cent of world rubber demand and despite China's surging car sales, orders have yet to flow in strongly for rubber in Malaysia, said Malaysian Rubber Board (MRB) chairman Megat Zaharuddin.

Malaysia, the No 3 rubber supplier after Thailand and Indonesia, shipped out 1.1 million tonnes of the commodity in 2008.

The new estimate is nearly double Malaysia's initial plan to remove 55,070 tonnes of rubber this year along with Thailand and Indonesia's respective export cuts under the International Rubber Consortium (IRCo) to shore up prices.

Mr Megat's forecast is more optimistic compared with other MRB officials who had predicted exports to fall by 30 per cent this year when US carmakers asked for government bailouts.

'The positive news about economic recovery is there but it has yet to translate into more demand for Malaysian rubber from the auto sector,' Mr Megat told Reuters in an interview.

'If we are really unlucky, we are looking at a 10 per cent drop in exports. But hopefully China comes in, the news out of there is positive so far.'

Record demand from China's car sector is expected to support rubber prices that have already bounced from seven-year lows of US$1.10 a kilogramme in December, thanks to heavy rains and replanting programmes.

Cargoes to China have picked up after the Chinese New Year festival in January as it had earlier defaulted on shipments late last year when physical prices plummeted.

China has overtaken the US as the world's largest car market this year, perking up the gloomy industry as passenger car sales in May soared 47 per cent from a year earlier as stimulus measures lured consumers to showrooms.

'Prices (for Malaysian rubber) should not go below five ringgit a kilogramme for the rest of the year, output is weak and we are banking on China demand and strong oil,' Mr Megat said.

'So far the full-year average (for 2009) is slightly below this price level but it will become a solid price soon enough.'

But benchmark Tokyo rubber futures, which set the tone for physical rubber prices in South-east Asia, briefly touched a near eight-week low yesterday, pressured by weak oil prices which undermined sentiment and triggered selling. -- Reuters