India backs idea for rubber producer cartel

India backs idea for rubber producer cartel

SINGAPORE (Bloomberg): India welcomes Malaysia's proposal to
form a cartel of rubber producers, following Kuala Lumpur's
decision to pull out of the International Natural Rubber
Organization, an Indian Rubber Board official said yesterday.

"The producers' cartel will be useful since current prices are
not satisfactory to farmers," in India, said K.J. Mathew,
chairman of India's Rubber Board. He said India has had to
subsidize farmers by absorbing excess supply from the domestic
market as prices fell. He said he didn't know how much the
subsidies amounted to.

India, the world's fourth-largest producer and consumer of
rubber, is not a member of the International Natural Rubber
Organization, or INRO. It is a member of the Association of
Natural Rubber Producing Countries, which promotes producer
interests.

An economic slump in Asia has eroded rubber demand, pushing
down world rubber prices 30 percent in the last 12 months,
hurting growers in India and elsewhere. INRO has a mandate to buy
rubber from the open market to boost prices and sell from its
buffer stocks when prices rise. Its failure to intervene in the
market while prices fell has angered producer members.

Most of the natural rubber produced in India is used by the
local manufacturing industry to make tires, hydraulic hoses and
car components.

India produced 584,000 tons of natural rubber in fiscal 1998,
up 6 percent from the previous year. Output in fiscal 1999 is
expected to be almost 7 percent higher at 624,000 tons, Mathew
said.

The benchmark Ribbed Smoked Sheet for September delivery on
the Singapore Commodity Exchange, recently traded at 65.50 U.S.
cents a kilogram, a near nine-week low.