The world’s largest natural-rubber producer, Thailand, said it would unload huge stocks of the product, a move that is likely to drive already depressed prices lower in the week ahead.
The news of the impending sale followed the failure of earlier efforts by the three-country southeast Asian cartel that dominates the sector to put a floor under rubber prices, which are down by as much as 30% since the start of the year.
Thailand’s agriculture minister, Yukol Limlamthong, said it could be better to release stocks before production picks up later this month to cushion any price fall, although in comments to The Wall Street Journal on Saturday he declined to give a specific date.
In the low season between late February and the end of May, latex output slows to a trickle.
Thailand, the world’s largest producer and exporter of natural rubber accounting for one-third of supply, has built up a 220,000-metric-ton stockpile.
The other two members of the International Rubber Consortium, which collectively produce more than two-thirds of the world’s natural rubber, are Indonesia and Malaysia.
The rubber market—valued at more than $30 billion a year—has been in oversupply for several years.
In February, the consortium publicly urged its members not to sell more rubber, in a moved aimed at stemming a 7% price plunge seen in the first 10 days of that month.
Similar efforts by the group in August 2012 had succeeded temporarily, and buoyed prices for the following six months.
The Singapore-based International Rubber Study Group has predicted an output surplus of 428,000 tons this year.
Stockpiles in major consuming countries including China and Japan are high already.
Despite worries about slowing growth in China, the world’s biggest buyer, its imports are still growing. They rose 16% in March from year-earlier levels.
Mr. Yukol was quoted in local media Friday as saying that the stock would be sold as soon as possible as its quality will deteriorate with time, reducing its value. Storage costs around 20 million Thai baht ($615,800) a month.
The Thai government’s rubber stocks were built up in state-funded price-support programs over the past two years, which including buying rubber at above-market rates to support rural incomes—a move that mirrors its rice subsidy program.
After the minister’s comments were reported Friday, benchmark international rubber prices on the Tokyo Commodity Exchange ended 1.7% lower in after-hours trading, at 203.8 yen ($1.99) a kilogram.
The minister had in April already signaled there would be a sale from stocks, news which had pushed prices down 6%.
Phillip Futures Singapore senior commodities manager Avtar Sandu said the announcement of imminent sales would further depress what is already a bear market.
Tocom rubber is likely to test the 4½-year low of ¥196.7/kg hit two weeks ago, he said.
The Japanese market will be closed Monday and Tuesday in observance of public holidays and the Thai market also will be shut Monday. Rubber futures will be trading on the Shanghai Futures Exchange and the Singapore Exchange. S68.SG -0.43%
Source: http://online.wsj.com/news/articles/SB10001424052702303948104579540792038533528
