Top three rubber producers aim to set up regional market

Friday, 16 December 2011 01:56 - - {{hitsCtrl.values.hits}}

BANGKOK (Reuters): The world’s top three rubber producers – Thailand, Indonesia and Malaysia – aim to launch a regional rubber market to set realistic prices and cushion farmers from volatility in futures prices, a senior official said on Thursday.

“After a ministerial meeting in Bali, we agreed to set up a regional centre of rubber, or a regional market that would help reflect realistic prices from producers,” Yium Tavarolit, chief secretary of the International Rubber Consortium (IRCo), told Reuters, referring to an annual meeting in Bali early this week.

The IRCo brings together rubber industry officials, exporters and government officials from the three Southeast Asian countries.

“The idea is still in a stage of feasibility study and the market could be a physical market, a futures market or a hybrid one,” he added.

The top three producers discussed volatile rubber prices at the ministerial level meeting of the International Tripartite Rubber Council (ITRC) in Bali, but the council did not take further steps to stabilise prices, saying industry fundamentals remained strong, with no stocks overhang in the market.

“The ministers noted the recent downtrend of natural rubber prices. The decline was due to the weak sentiment brought by the euro zone debt crisis and global economic slowdown,” the ITRC said in a statement.

Benchmark Thai smoked rubber sheet (RSS3), offered at $3.35 per kg on Thursday, has almost halved from a record high of $6.40 per kg in February.

The top three rubber producers, who account for around 70 per cent of global rubber output, normally use supply cuts and export curbs to help support prices, although some traders are sceptical about the effectiveness of the measures.

In December 2008, when physical rubber fell to a near seven-year low of $1.10 per kg as global recession loomed, Thailand, Indonesia and Malaysia agreed to cut exports by a total of 915,000 tonnes in 2009 to prop up prices.

The market started to rebound from mid – 2009, but that was largely due to rising demand from tyre companies in China and India. The export restriction plan was never strictly enforced.