BANGKOK: Natural-rubber (NR) producing nations Thailand, Indonesia and Malaysia, under the framework of the International Tripartite Rubber Council (ITRC), intend to invite consultancy companies to study the establishment of a regional rubber market to provide basic price discovery and hedging functions.
The study will be coordinated by International Rubber Consortium Ltd. (IRCo) and will assess the viability of such a market and recommend an appropriate model and structure.
IRCo invited interested companies to submit a detailed work plan and study cost to the organization by Aug. 15.
Thailand, Indonesia and Malaysia control close to 65 percent of global NR production, but they don’t have an established futures market that can provide basic price discovery and hedging functions, the council said in prepared documents.
As a result, these nations have to rely on third-party exchanges, such as the Shanghai Futures Exchange, Tokyo Commodity Exchange and Singapore Exchange for these functions.
The ITRC has been studying this move since 2010, when it set up the Expert Group on the Regional Rubber Market.
Developing a more reflective price discovery mechanism, IRCo said, would encourage NR producers, processors, tire and rubber product makers and speculators/investors to make use of the regional rubber market for risk management.
It also could generate more market activities and curb market volatility in times of distress, IRCo said. This report appeared on the website of European Rubber Journal, a sister publication of Tire Business.