Asia’s top rubber producers have agreed to cut exports by 615,000 tonnes for six months from March, moving to lift prices that have tumbled to their lowest since the global financial crisis amid excess supply.
Benchmark rubber futures in Singapore and Japan rallied 2-3% on the news. The benchmarks sank in January to their lowest levels since end-2008 to early 2009.
Thailand, Indonesia and Malaysia, which produce nearly 70% of the world’s natural rubber, said in a joint statement that the move was to address a decline in rubber prices which has had “a direct effect on the income of rubber smallholders in our three countries.”
Thailand will cut exports by 324,000 tonnes, Indonesia by 238,740 tonnes and Malaysia by 52,260 tonnes, according to a statement from the International Tripartite Rubber Council (ITRC), which groups the three producers.
The total cuts account for nearly 6% of global natural rubber output.
“The three countries’ ministers believe that cutting exports and boosting domestic use of rubber will drive up prices and fix the price slump, making prices fair for rubber farmers,” Thailand’s agriculture ministry said in a statement.
Previous efforts by major rubber producers to cut exports or output have only had a fleeting impact on prices amid a slowdown in top rubber importer China. In 2014, the ITRC members also agreed to cut exports to curb excess supply.
Before that, they collectively cut shipments by 300,000 tonnes in 2012-13, or roughly 3% of 2012 global output. The intervention only briefly supported prices and Indonesia called for the pact to be discontinued.
Besides cutting exports, the three countries today also agreed to increase domestic consumption of rubber – including for road and railway construction.
“We are optimistic with joint implementation of these measures, rubber price will recover and continue to be fair and remunerative to all smallholders and other stakeholders in the natural rubber industry,” the ITRC said in the statement.
Thailand, the world’s top rubber producer and exporter, will cut its rubber exports by 50% starting March, said the Rubber Authority of Thailand.
“The three countries will cooperate in cutting exports by 615,000 tonnes from March to August,” said Chao Songarvut, acting director of the Rubber Authority of Thailand, adding that the move was to drive up prices.
Source: Reuters
