Rubber producers asked to cut exports if needed

Thursday, 29 September 2011 00:14 - - {{hitsCtrl.values.hits}}

SINGAPORE (Reuters): The International Rubber Consortium (IRCo) has asked Thailand, Indonesia and Malaysia to curb exports if rubber prices fall further in the wake of a global economic slowdown, a senior Thai official said on Tuesday.

Thailand, Indonesia and Malaysia, which together account for about 70 per cent of global rubber output, agreed in December 2008 to slash exports and refrain from selling at below $1.35 a kg following a drop of 60 per cent in prices. That was the toughest action by members of the group to date.

“We’ve advised the three countries to slow exports if the rubber price falls to a certain level that we can’t accept and hurt rubber small holders,” said Yium Tavarolit, IRCo’s chief secretary and economist.

“We are waiting for responses from the three countries. We can’t disclose the price level. We call it our defence price. If the price reaches the threshold, we have to react,” he told Reuters from Bangkok.

Tokyo rubber futures, which set the tone for physical prices, rebounded on Tuesday after tumbling 12 per cent to a one-year low around 303 yen a kg on Monday, hit by a global sell-off in risk assets.

The key Tokyo Commodity Exchange rubber contract for March delivery <0#2JRU:>, which debuted on Tuesday, ended at 319.5 yen a kg after opening at 318.7 yen. In December 2008, Thailand, Indonesia and Malaysia agreed to cut exports by a total of 915,000 tonnes in 2009 to prop up prices because the economic meltdown, which sent the price of Thai RSS3 grade to a near seven-year low of $1.10 a kg. The IRCo brings together rubber industry officials, exporters and government officials from the three Southeast Asian countries. RSS3, often seen as benchmark physical prices in Asia, currently hovers at $4.50 a kg, down from a lifetime high at $6.40 in February.

The cash price of unsmoked sheet (USS3) dropped to around 120 baht ($3.87) a kg from 130 baht last week.“Curbing exports was already among our plans,” said Jirakorn Kosaisewe, Director General of Department of Agriculture.

“Former Deputy Prime Minister Suthep announced earlier that if it went lower than 120 baht for farm grade, we’d ask exporters to keep and stock it longer,” said Jirakorn, referring to a government move in March to keep rubber in stock to shore up prices.

Thailand is the world’s largest producer and exporter of rubber. On Monday, IRCo’s chief executive, Darmansyah Basyaruddin, said in Jakarta that natural rubber prices could still rise to more than $5 a kg in the fourth quarter of this year as growth in emerging economies is expected to offset a slowdown in Europe and the United States.