INRO considers rubber market intervention

INRO considers rubber market intervention

SINGAPORE (Dow Jones): The International Natural Rubber Organization has inquired about buying rubber from dealers, exporters and producers in Asia, after the rubber group's five- day Daily Market Indicator Price breached the "may buy" intervention level, rubber traders told Dow Jones Newswires yesterday.

INRO's five-day DMIP average stands at 182.44 at present, below the 183.00 "may buy" level.

The DMIP is based on INRO's reference price and denominated in a composite index of Malaysian ringgit and Singapore dollar. If the five-day DMIP average breaches the "may buy" level, INRO may, but is not obliged to, buy rubber in the market.

INRO has asked for offers for September and October shipments for the following grades: ribbed smoked sheet 1, ribbed smoked sheet 3, and technically specified rubber 20, said a Tokyo-based broker with a large Japanese brokerage.

Exporters and producers in Thailand, Indonesia and Malaysia, the world's top three natural rubber producing countries, also confirmed that they've received inquiries from INRO early yesterday. INRO officials weren't available for comment.

Although some market participants are "betting on" the possibility of an INRO intervention, a large number of rubber traders and brokers are far from convinced that INRO's latest inquiries suggest a real buy buffer stock operation.

"I think making such inquiries is more political than economic," said a Tokyo-based broker with another large Japanese brokerage. "It's a gesture to the ANRPC meeting."

In Bangkok Aug. 19-21, the Association of Natural Rubber Producing Countries is scheduled to hold a special meeting to discuss, among other things, Malaysia's decision to quit INRO.

Thailand has threatened to do the same. Both countries have complained that INRO has recently given scant support to weak rubber markets.

"INRO is trying to soothe Malaysia and Thailand, while encouraging Indonesia (not to quit INRO). But I don't think they will buy seriously," said the second Tokyo broker.

The Kuala Lumpur-based ANRPC groups eight natural rubber producers.

INRO isn't likely to launch a substantial intervention soon, because it doesn't have "much money" right now, said the first Tokyo broker.

INRO currently has around 100 million Malaysian ringgit set aside for any potential market intervention, according to INRO officials.

It would be foolish to take the INRO inquiries as bullish news, he said, because even if INRO steps in, the long-term outlook for the commodity will still be characterized as being oversupplied.

"It's still a bearish market in the long run," he said.