Thailand, Indonesia and Malaysia, which produce about 70 percent of world’s natural rubber, agreed to cut exports from next year to drain supplies and bolster prices which are headed for a second year of declines.
The reduction in shipments will ensure there is no excess supply in the global market, Malaysian Plantation Industries and Commodities Minister Douglas Uggah Embas told reporters in Kuala Lumpur today after a ministerial meeting of the International Tripartite Rubber Council. The group is yet to decide the amount and timing of the cut, said Yium Tavarolit, chief executive officer of International Rubber Consortium Ltd.
Rubber prices from Tokyo to Thailand and Singapore have rebounded after touching their lowest levels in more than five years in October as producer groups pledged to refrain from selling below $1.50 a kilogram. The council, which represents government officials, growers and exporters, last cut shipments by 300,000 tons in the six months through March 2013.
“We’ll work out the excess supplies and agree that we will not export more than the demand,” Uggah said. The ministers also agreed to form a regional market in the next 18 months and increase domestic use of the commodity used in tires by as much as 10 percent annually, he said.
The council is yet to decide on a location for the new regional market, Yium said. On the export cut, a working group was assigned to assess the amount with implementation at a suitable time in coming months, he said.
Manage Supplies
“We have to consider and evaluate relevant factors,” Yium said. “If it’s successful, we will carry on. If the environment is not supportive, we won’t implement it. In principle, we intend to implement it.”
The producers will manage supplies between 2015 and 2020 by ensuring that the planted area of rubber is within the target set by the council’s committee, Uggah said. This will prevent excess supplies in the future, he said.
In February, the International Rubber Consortium, urged members to refrain from selling at low prices and also asked Vietnam, which is the third-largest grower, to extend support to steps to boost prices.
Officials from Thailand, Indonesia and Malaysia also met their counterparts from Vietnam, Cambodia, Myanmar and Laos to discuss supply and demand management.
Futures in Tokyo tumbled 25 percent this year to 206 yen a kilogram ($1,737 a ton) as concerns mounted that demand from China would weaken as the economy in the top consuming nation slowed. Prices recovered 19 percent from a five-year low of 173.8 yen reached on Oct. 3. Export rates in Thailand rose 9.3 percent to 53.80 baht a kilogram today after felling to 49.20 baht on Oct. 2, the lowest since December 2008.
The surplus will shrink to 43,000 tons in 2015 from 292,000 tons this year, according to The Rubber Economist, a London-based industry adviser.
Source: Bloomberg
