Gapkindo warns of rubber price slide

Adianto P. Simamora, The Jakarta Post, Jakarta

The Indonesian Rubber Producers Association (Gapkindo) warned the rubber price would fall if Thailand sells its stockpile of 130,000 tons.

"If the government of Thailand sells its entire stockpile, there will be an abundant supply in the market and I predict it will force the rubber price down to 60 cents per kilogram," Gapkindo chairman Asril Sutan Amir told reporters on Friday.

He said news that Thailand was starting to unload its stockpile had weakened the rubber price in the past week to 75 cents, from the previous price of 89 cents per kilogram.

Thailand's Deputy Agriculture Minister, Prapat Panyachatirak, was quoted by Reuters as saying it has sold off its stockpile of 130,000 tons of RSS 3 rubber sheet at $825 per ton.

Asril admitted the association had not received any confirmation from the Thai government over the news.

"If this (sale) really happens, plans to prop up the rubber price to US$1 in September will be difficult to fulfill and it will add to the misery of (rubber) farmers," Asril said.

He said that the sale would break an earlier deal signed by Thailand, Indonesia and Malaysia to form a cooperation to help boost the rubber price to the $1 level, after the price plunged to a 30-year low of less than 50 cents per kilogram late last year.

The three countries are the world's top rubber producers, which jointly account for around 85 percent of the world's natural rubber production.

Asril said there was a temptation for the countries to sell their rubber stockpiles as the price of the commodity had been on the rise recently.

The three countries formed the International Tripartite Rubber Council (ITRC) in December last year in Bali.

Under the ITRC framework, the three countries have pledged to cut rubber output by four percent and exports by ten percent starting this year.

For 2002, Indonesia will lower its exports to 1.23 million tons, while Thailand has set a limit at 1.93 million tons and Malaysia will cap its export volume at 227,000 tons.

In addition, the three countries also established a $225 million joint rubber consortium to buy rubber from the market in a bid to push up the price.

Thailand, as the biggest rubber exporter, has agreed to contribute some $25 million; Indonesia, the second biggest rubber exporter, will contribute $18.75 million; and Malaysia will give $12.5 million.