Asian rubber producers agree to manage exports to fight oversupply

Friday, 21 November 2014 01:15 - - {{hitsCtrl.values.hits}}

Thailand, Indonesia, Malaysia say to “manage” rubber exports
Minister declines to give details on how step will work
Analysts doubt measure will raise battered prices

KUALA LUMPUR/SINGAPORE (Reuters): Top Asian rubber producers have agreed to “manage” exports to international markets to curb excess supply, although analysts said the step would have little impact on battered prices without a robust pickup in demand. Benchmark rubber prices have fallen a quarter this year, standing just above five-year lows plumbed last month amid a supply glut deepened by a slowing economy in top consumer China. Thailand, Indonesia and Malaysia, which produce nearly 70% of the world’s natural rubber, have also agreed not to expand new rubber planting areas beyond targets set earlier and to boost domestic rubber consumption by 10% annually, according to a joint statement issued on Thursday. Malaysian plantation industries minister Douglas Uggah Embas, who held a media briefing after a meeting of producers in Kuala Lumpur, declined to give further details on the measures, including how the three countries aim to manage exports. Thailand, Indonesia and Malaysia – which form the International Rubber Consortium – in 2012-13 collectively cut exports by 300,000 tons, or roughly 3% of 2012 global output. The intervention only briefly supported prices and Indonesia called for the pact to be discontinued. “(The new steps) can support but they cannot boost prices because only growth in demand can do that,” said Gu Jiong, an analyst at Yutaka Shoji Co in Tokyo. “The biggest market is China and demand growth there is getting smaller because the economy is slowing.” Rubber associations from Thailand to Cambodia have this year urged producers not to sell the commodity below a minimum price of $1.50 per kg, while top producer and exporter Thailand later approved a subsidy plan worth around $1.8 billion to support farmers. Those measures helped global rubber prices recover from their lowest levels since 2009, but they have remained under pressure from slower Chinese demand, forcing many farmers in Asia to abandon tapping in favour of more lucrative jobs. The most-active rubber contract for April delivery on the Tokyo Commodity Exchange traded at 206 yen ($1.74) per kg on Thursday, after hitting a five-year low of 173.8 yen in early October.