SINGAPORE: The International Rubber Consortium (IRCo), which represents rubber producers of Thailand, Indonesia and Malaysia, has recommended its members should not sell natural rubber at the current low prices.
Physical rubber prices on Singapore’s SICOM exchange are close to their weakest since 2009, while Indonesia’s SIR20, usually the cheapest tyre grade in Southeast Asia, is trading around its lowest in five years.
“The recent sharp fall in natural rubber prices has resulted in natural rubber being traded at a discount to synthetic rubber which is against the norm for the last few years,” the IRCo said in its website.
“In light of the above, IRCo is of the view that prevailing natural rubber prices are unreasonably low and would immediately advise respective trade associations in the ITRC countries to jointly encourage their members not to offer natural rubber at prevailing low price …,” it said.
The IRCo did not elaborate on its advice. A representative was not immediately available to comment.
Producers Members Thailand, Indonesia, and Malaysia account for more than 70 percent of global rubber output. They met in Singapore on Saturday to review the current low prices, blamed on worries about falling demand from top consumer China and weakness on Tokyo futures.
Any decision made by the IRCo to support prices would have to be ratified by the International Tripartite Rubber Corporation (ITRC), which brings together senior government officials from the IRCo countries.
Industry officials expect the three countries to meet again later this month to examine whether to curb exports, reduce tapping or buy the commodity from farmers in a co-ordinated fashion to reverse the price declines.
The three Southeast Asian nations last acted jointly in 2012-2013, agreeing to cut exports by 300,000 tonnes, or 3 percent of 2012 global output.
The IRCo, however, said rubber inventories in the three countries were low, which could be aggravated in the coming months with the dry wintering season expected to be severe.
During the wintering season, rubber trees shed their leaves and latex output falls.
“Fundamentally, prices should go up in February-March when major producing countries are in dry season and rubber trees normally stop producing latex,” Yium Tavarolit, IRCo chief executive, told Reuters last week.
“If prices keep falling in March, we would have to figure out some measure to shore up prices.”– Reuters