The Thai military government has approved a plan to sell its 200,000 tonne rubber stockpile to ease price pressures and cut storage costs, a senior government official said on Monday (Aug 25), potentially hitting prices in the short-term.
Thailand, the world’s biggest rubber exporter, normally exports about 250,000-300,000 tonnes a month. Global rubber prices have fallen more than 25 percent this year, due to oversupply and worries about demand from top consumer China.
“This overhang of stocks has kept pressure on prices for such a long time. We are about to cut it off to reduce this negative factor which keeps pressure on prices,” Dumrong Jirasutas, head of the Department of Agriculture told Reuters.
Dumrong declined to say if the 200,000 tonnes would be sold at once or reduced gradually.
Benchmark sixth-month Tokyo rubber futures for January delivery were up slightly at 203.1 yen per kg in early Asian trade, supported by firmer equity markets and a weaker Japanese yen.
However, prices have tumbled in recent years, with benchmark Thai smoked rubber sheet (RSS3) being offered on Monday at $1.85 per kg on Monday, down from a record $6.40 per kg in 2011.
Traders said on Monday (Aug 25) the sale decision could put further pressure on rubber prices in the short-term.
Thailand’s military government in June decided to shelve a plan by the previous administration to sell 200,000 tonnes of rubber from stocks, focusing instead on measures to increase domestic consumption to shore up prices.
The previous civilian caretaker government had planned the stock sales after buying rubber from farmers during an intervention programme to prop up prices that ran from October 2012 to May 2013.
Thailand, the world’s biggest rubber producer and exporter, produced 4.2 million tonnes of rubber in 2013, of which 3.7 million tonnes were exported.
(Reuters, August 25, 2014)
