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Tuesday, January 25, 2022

Rubber Exporters in Thailand to Refrain From Selling Below Cost

Rubber shippers from Thailand, the world’s largest producer, pledged to refrain from selling below production costs as suppliers in Asia take steps to halt a slump in prices of the commodity used in tires.

Exporters should not sell ribbed smoked sheet below $1.90 or 62.70 baht a kilogram as the average output cost for growers in Southeast Asia is about 60 baht, said Chaiyos Sincharoenkul, president of the Thai Rubber Association.

Futures in Tokyo, the global benchmark, entered a bear market last month as stockpiles in China, the biggest consumer, expanded to a nine-year high. World supplies will exceed demand for a fourth year in 2014, says the International Rubber Study Group. Thailand, Indonesia and Malaysia, which account for 70 percent of production, advised members this week not to sell at prevailing rates and predicted a seasonal decline in output.

“Processing plants have not built up enough stockpiles to last through the wintering season,” Chaiyos said in a phone interview yesterday. “Supply will tighten even more during the wintering period, boosting prices,” he said. Trees produce less latex during the season which lasts from February to May in Thailand and output may decline more than usual because of drought, he said.

Prices in Thailand plunged 54 percent since the end of 2010 as production increased. Rubber free-on-board at Songkhla fell to 68.50 baht on Feb. 6, the lowest since August 2009.

Slumping Prices

International Rubber Consortium Ltd., the marketing arm of the group representing government officials, exporters and growers from the top three suppliers, sees prices as “unreasonably” low, it said in a statement on its website Feb. 10. IRCo will propose to “accelerate and enhance the implementation of the Supply Management Scheme,” it said.

Futures jumped as much as 1.7 percent to 230.70 yen a kilogram ($2,249 a metric ton) on the Tokyo Commodity Exchange today, before trading at 227.50 yen. Prices plunged 17 percent this year after losing 9.3 percent in 2013. Stockpiles monitored by the Shanghai Futures Exchange total 207,658 tons, the highest level since October 2004, bourse data show.

Asian suppliers failed to agree new curbs last year after reducing exports by 300,000 tons in the six months through March, according to the International Tripartite Rubber Council, which represents Thailand, Indonesia and Malaysia.

Production from Thailand has declined as growers in the north and northeast regions stopped tapping because of drought, said Chaiyos, who is an executive director of Sri Trang Agro-Industry Pcl (STA), the country’s largest listed rubber exporter.

Output in Thailand will probably be about 4 million tons this year, little changed from 2013, as losses during wintering will be countered by gains in new plantation areas, said Chaiyos. Exports will be little changed at about 3.4 million tons and local consumption may reach 550,000 tons, he said.

Production in Thailand increased in the past three years and was 3.86 million tons in 2013, according to the Office of Agricultural Economics. The global surplus may be 241,000 tons in 2014 compared with 384,000 tons last year, the Singapore-based International Rubber Study Group estimates.

Source: Bloomberg

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