Analyst predicts weak rubber market this year
JAKARTA (JP): Rubber prices are likely to fall to US$1 a kilogram this year because the commodity's four-year marketing cycle is entering its downside, a rubber analyst warns.
Harry Tanugraha of PT Tunas Perdana Securindo predicted that, if the movement of rubber prices last year reflected the commodity's four-year cycle, producers should be prepared that this year's prices could fall to 1994's levels.
Harry said that last year had been a tough one for the rubber trade because 1995 bore the peak of the cycle with rubber prices reaching their highest levels.
The average rubber price in 1995 was $1.5 a kg, compared to $1 in 1994 and $1.3 in 1996.
The country's export revenue from rubber in 1995 reached $2 billion, compared to $$1.27 in 1994 and $1.7 billion last year.
Harry predicted that the conditions in 1994 were likely to recur this year.
He said the rubber market would slacken further this year with countries such as Russia and China -- which usually push up prices -- postponing their orders.
Russia and East European countries had tight budgets while China was busy dealing with its internal political affairs and the hand over of Hong Kong to Chinese sovereignty, he said.
"Worse still, producer countries like Thailand, Indonesia and Vietnam have announced plans to increase their natural rubber production," he said in a statement sent to The Jakarta Post yesterday.
He said this situation, which had developed since late 1995, had slashed prices from $1.6 a kg in early 1996 to $1.25 a kg at the end of 1996.
On the international market, he said, the impact of global trade could already be felt.
"The United States, for example, has decided to cut back its buffer stocks and gradually sell on the market starting this year," he said.
He said the current rainy seasons should have boosted prices, but the United States' move and the slackening demand in other countries were likely to suppress prices if not cut them.
In Indonesia, Harry said, low prices last year had caused several producers to convert their rubber plantations to oil palm, housing and industrial estates.
He said the government's plan to establish a futures commodity exchange would help remove price and trade distortions affecting the market.
"It is time to remove interventions made for the sake of price stabilization, which, in the end, causes market distortions and a high (cost) economy," Harry said.
The government last month submitted a long-awaited bill on futures commodity trading to the House of Representatives.
Minister of Trade and Industry Tunky Ariwibowo said the bill would basically provide a legal foundation for futures commodity trading, which would be supervised and controlled by the government's Commodity Supervisory Board under the Ministry of Industry and Trade. (pwn)