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.